Tag Archives: Alexis Tsipras

“In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem.

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.

“It is appalling and it has happened almost as a deliberate act of policy which makes it even worse”. [Bold highlight added]

“The Greek people have been living through hell during the last six years, and unfortunately they trusted that Tsipras [PM] would put an end to the extreme austerity measures, which are combined with a total undemocratic regime. Unfortunately, instead of putting an end, he put his signature to a third memorandum, which is even worse than the previous two…

“People are back on the streets protesting for their rights and dignity because right now they’re being asked to pay taxes which amount to almost the totality of their revenue. They’re asked to give up their homes… They’re asked to surrender public property, which is privatized at very, very low prices. And, they’re also asked to give up democracy”

On 13th July [2015], the democratic elected Greek government of Alexis Tsipras was brought to its knees by the European Union. The “agreement” of 13th of July is in fact a coup d’état. It was obtained by having the European Central Bank close down the Greek banks and threaten never to allow them to open up again, until the Greek government accepted a new version of a failed program. Why? Because official Europe could not stand the idea that a people suffering from its self-defeating austerity program dared elect a government determined to say “No!”.

So begins the call for “A plan B in Europe” put together by a group of prominent European left-leaning politicians from Parti de Gauche (France), Die Linke (Germany), Red Green Alliance (Denmark), Socialist Party (SP) (Ireland), Bloco de Esquerda (Portugal), and Syriza (Greece). Top of the bill is Yanis Varoufakis (a principle author, I imagine, given some of the polemical flourishes within this signed but otherwise uncredited page-long call to action).

The piece continues:

We must learn from this financial coup. The euro has become the tool of economic and governmental dominance in Europe by a European oligarchy hiding behind the German government, delighted to see Mrs Merkel doing all the « dirty work » other governments are incapable of undertaking. This Europe only generates violence within nations and between them: mass unemployment, fierce social dumping and insults against the European Periphery that are attributed to Germany’s leadership while parroted by all the “elites”, the Periphery’s not excluded. The European Union has thus become an agent of an extreme right wing ethos and a vehicle for annulling democratic control over production and distribution throughout Europe. 3

Now let us go back nine months – back to the eve of the Greek referendum during the dog days of last summer, and just before the extraordinary ‘oxi’ vote which momentarily reverberated across our western hemisphere.

Yanis Varoufakis [3:45 mins in]: Let me tell you something which is probably unknown. Ever since we declared the referendum and we incensed our European partners we had the most interesting proposals coming from Brussels. Perhaps this referendum and the impasse it represents concentrated several minds in Brussels and we’ve had some really good proposals – proposals we would sign on the dotted line for.

Paul Mason: You have a proposal you would sign on the dotted line for?

Varoufakis: Yes, we do.

Mason: Where is it?

Varoufakis: Well, I’m not going to tell you. It’s somewhere in this building. But the crucial part of the story is that before this proposal becomes a genuine negotiating document which we can sign off on Monday, the people have to empower us with a “no”.

From the Channel 4 news interview embedded above broadcast on July 3rd 2015 that is also available here.

Shortly thereafter [July 5th] the people of Greece, perhaps in light of Varoufakis’ advice, went to the polls and voted overwhelming in favour of rejecting the Eurogroup deal with its demands for increasing doses of “austerity” and ‘Washington Consensus’-style ‘conditionalities’ — the enforced privatisation of public services and other forms of so-called ‘deregulation’. To which the response from Brussels was to immediately double down by issuing still harsher neoliberal demands. With this, the mask of European social democracy fell away completely.

Nobel laureate economist, Paul Krugman, was one who helped to promote the hashtag #ThisIsACoup when he wrote in the New York Times:

This Eurogroup list of demands is madness. The trending hashtag #ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.

Left Unity (which has a loose alliance with political parties Syriza and Podemos) also sent a message of support to the Greeks:

The people of Greece have resisted every threat, every piece of establishment propaganda telling them a No vote would mean ruin, and asserted their democratic rights. This will be a No heard around the world.

Now is the time to celebrate – and to step up our solidarity ahead of the Troika’s next move. Come along to what will now be a victory rally at the TUC’s Congress House, organised by Greece Solidarity Campaign.

And the Greeks had indeed empowered their government with a resounding ‘no’, but instead of fighting on, Syriza under Tsipras’ leadership swiftly capitulated in what must be one of the fastest political U-turns of all time. In response, Varoufakis resigned, refusing to criticise his friend Tsipras, and also declining an invitation to join a small breakaway faction who hoped to restore the party’s anti-austerity ticket on which Tsipras and Syriza had stood little more than six months previously.

So there is a mystery here that remains. Varoufakis, who prides himself on openness, has simply never explained what actually happened during those most momentous days in early July. Specifically, what became of that proposal from Brussels he was so keen “to sign on the dotted line”. Surely he owes the Greek people a fuller explanation.

Moreover, while Varoufakis was quick to attribute blame for the Eurogroup failures on the inflexibility of Wolfgang Schäuble and fellow German Karl Lamers, he has to a large extent absolved other key players including, most notably, President of the ECB, Mario Draghi for their part in “the coup” (his words).

I have consistently defended Varoufakis and Tsipras and been scathing of others on the left for being too hurried in passing judgement and unduly hypercritical (as many earlier posts testify). Caught up in the drama, like others hoping Syriza’s election signified the beginning of truly revolutionary reforms, I confess that I became a cheerleader for both.

With the benefit of hindsight it is clear that Syriza and Varoufakis were both tremendously guilty of an over-reliance on the efficacy of “reasonableness” (more here), because ‘reasonableness’ only ever makes headway when it engages with opposition that is principled and reasoned. Against the irrational, it is blunt, and against the unscrupulous it becomes a danger to itself. Yet Syriza and Varoufakis seem incapable of learning this simple lesson. This is what Varoufakis wrote in the abstract to his “Confessions of an Erratic Marxist” [December 2013]:

Should we use this once-in-a-century capitalist crisis as an opportunity to campaign for the dismantling of the European Union, given the latter’s enthusiastic acquiescence to the neoliberal policies and creed? Or should we accept that the Left is not ready for radical change and campaign instead for stabilising European capitalism? This paper argues that, however unappetising the latter proposition may sound in the ears of the radical thinker, it is the Left’s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone’s inevitable crisis. 4

Throughout the crisis, he and the party he once represented at the Eurogroup meetings have been chewed up and spat out time and again and yet his response has been to remain unruffled and reasonable in his continued fight (hardly the right word) “to save European capitalism from itself”.

Today Varoufakis leads a parallel campaign Democracy In Europe 2025 made up of lecture tours and larger academic-style conferences making speculative calls for a Plan B in Europe. Beyond the well-meaning rhetoric, the movement is entirely bereft of strategy. And my immediate question to Varoufakis is actually this: why must we wait until 2025 to bring democracy (a gift of the ancient Greeks) back to Europe? After all he knows better than most that a week in politics is an exceedingly long time – so a decade might as well be an aeon.

Here then, to redress the balance of earlier posts (at the risk of angering readers and friends alike), I present the condemnatory appraisal courtesy of political commentator James Petras, who in March 2015 (a mere two months after Syriza were elected) wrote the following:

The vast majority of Greeks, who voted for Syriza, expected some immediate relief and reforms. They are increasingly disenchanted. They did not expect Tsipras to appoint Yanis Varoufakis, a former economic adviser to the corrupt neo-liberal PASOK leader George Papandreou, as Finance Minister. Nor did many voters abandon PASOK, en masse, over the past five years, only to find the same kleptocrats and unscrupulous opportunists occupying top positions in Syriza, thanks to Alexis Tsipras index finger.

Nor could the electorate expect any fight, resistance and willingness to break with the Troika from Tsipras’ appointments of ex-pat Anglo-Greek professors. These armchair leftists (‘Marxist seminarians’) neither engaged in mass struggles nor suffered the consequences of the prolonged depression.

Syriza is a party led by affluent upwardly mobile professionals, academics and intellectuals. They rule over (but in the name of) the impoverished working and salaried lower middle class, but in the interests of the Greek, and especially, German bankers.

They prioritize membership in the EU over an independent national economic policy. They abide by NATO, by backing the Kiev junta in the Ukraine, EU sanctions on Russia, NATO intervention in Syria/Iraq and maintain a loud silence on US military threats to Venezuela! 5

By latest estimates total Greek debt is 384 billion euros, or US$440 billion. That’s approaching nearly twice the size of Greece’s annual GDP. A decade ago, in 2007-08 before the global crash, Greek debt was roughly half of what it is today, in terms of both total debt and as a percent of GDP. Greek debt was actually less than a number of Eurozone economies. So Greece’s debt has been primarily caused by the 2008-09 crash, Greece’s six year long economic depression [that] followed, the extreme austerity measures imposed on it by the Troika during this period which has been the primary cause of its long depression, and the Troika’s piling of debt on Greece to repay previously owed debt.

Contrary to European media spin, it’s not been rising Greek wages or excessive government spending that has caused the US$440 billion in Greek debt. Since 2009 Greek annual wages have fallen from 23,580 to less than 18,000 euros. Government spending has fallen from 118 billion euros to 82 billion.

writes Jack Rasmus in an extremely detailed overview of the state of the Greek crisis in light of the recent parliamentary vote (passed by a narrow margin of 153 to 145) to implement the latest demands of “the Troika” in order to ensure another tranche of unpayable loans. “Bailouts” that, as Rasmus explains at length, are then returned directly to the creditors:

As a recent in depth study by the European School of Management and Technology, ‘Where Did the Greek Bailout Money Go?‘, revealed in impeccably researched detail, Greek debt payments ultimately go to Euro bankers. For example, of the 216 billion euros, or US$248 billion, in loans provided to Greece by the Troika in just the first two debt deals of May 2010 and March 2012, 64 percent (139 billion euros) was interest paid to banks on existing debt; 17 percent (37 billion euros) to Greek banks (to replace money being taken out by wealthy Greeks and businesses and sent to northern Europe banks), and 14 percent (29 billion euros) to pay off hedge funds and private bankers in the 2012 deal. Per the study, less than 5 percent of the 216 billion euros went to Greece to spend on its own economy. As the study’s authors concluded, “ the vast majority (more than 95 percent) went to existing creditors in the form of debt repayments and interest payments”. And that’s just the 2010 and 2012 Troika deals. Last August’s third deal is no doubt adding more to the totals. 6

[bold highlight added]

Click here to read Jack Rasmus’ full article published in Counterpunch.

The cycles of debt-repayment might literally be never-ending, because Greece will never be able to fully repay all of its (odious) debts. It is a situation compounded because Greece’s already floundering economy is completely suffocated by the Troika’s imposed “austerity” regime.

But this disastrous situation is no accident. The trap in which Greece finds itself satisfies two neo-liberal objectives. Firstly, Greece becomes so impoverished that it is forced to sell state assets at rock-bottom prices. Secondly, the sustained wealth transfer from the pockets of the ordinary Greeks into the hands of the bankers helps to prop up a failed financial system.

Setting the bizarre academic justifications aside, and overlooking the deeper reasons Greece became so indebted in the first place, what we see is how the Troika – two thirds of which is the EU – has put the sanctity of debt repayment far above the sanctity of human well-being. So whenever Greece comes up gasping for air, the IMF and the EU repeatedly pushes it back under again:

The media persists in calling the looting of Greece a “bailout.”

To call the looting of a country and its people a “bailout” is Orwellian. The brainwashing is so successful that even the media and politicians of looted Greece call the financial imperialism that Greece is suffering a “bailout.”

writes former Assistant Secretary of the Treasury for Economic Policy and former Associate Editor of the Wall Street Journal, Paul Craig Roberts in a recent article entitled “We Have Entered The Looting Stage of Capitalism”. In the piece, Roberts explains the EU’s role and the IMF’s apparent policy shift as follows:

Having successfully used the EU to conquer the Greek people by turning the Greek “leftwing” government into a pawn of Germany’s banks, Germany now finds the IMF in the way of its plan to loot Greece into oblivion.

The IMF’s rules prevent the organization from lending to countries that cannot repay the loan. The IMF has concluded on the basis of facts and analysis that Greece cannot repay. Therefore, the IMF is unwilling to lend Greece the money with which to repay the private banks.

The IMF says that Greece’s creditors, many of whom are not creditors but simply bought up Greek debt at a cheap price in hopes of profiting, must write off some of the Greek debt in order to lower the debt to an amount that the Greek economy can service.

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. […]

The way Germany sees it, the IMF is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF.

As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principally the banks themselves or their major clients. […]

In other words, Greece is being destroyed by the EU that it so foolishly joined and trusted. The same thing is happening to Portugal and is also underway in Spain and Italy. The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine.

The current newspaper headlines reporting an agreement being reached between the IMF and Germany about writing down the Greek debt to a level that could be serviced are false. No “creditor” has yet agreed to write off one cent of the debt. All that the IMF has been given by so-called “creditors” is unspecific “pledges” of an unspecified amount of debt writedown two years from now.

The newspaper headlines are nothing but fluff that provide cover for the IMF to succumb to pressure and violate its own rules. The cover lets the IMF say that a (future unspecified) debt writedown will enable Greece to service the remainder of its debt and, therefore, the IMF can lend Greece the money to pay the private banks. […]

We have entered the looting stage of capitalism. Desolation will be the result. 7

The overarching agenda of the EU – a plan rarely mentioned above a murmur – is to fuse its member nations under unelected technocratic governance for the benefit of a few corporations and the oligarchs who own them. So the notion that sticking by the EU is some sense an act of European solidarity is extremely misguided. Having already sold many of its people down the river, however, we are rapidly approaching a critical and perilous moment.

The far-right is now on the rise in many parts of Europe – Greece being an example, although thankfully Golden Dawn remains very much a minority party. And this swing towards ring-wing extremism is a direct consequence of the EU’s savage economic policies combined with its abject failure to save refugees and resolve the so-called “migrant crisis” (more in a later piece). As this alarming political shift occurs, the EU does next to nothing to address it. No debt relief for Greece or the other struggling member states. No let up on enforced “austerity” or privatisation. Neo-liberalism to the bitter end. But then, after Greece was collectively punished for the insolence of its ‘oxi’ vote last summer, only the most dewy-eyed believers can remain in serious doubt of the EU’s callous indifference towards the plight of its poorest citizens.

It is a dangerous lie to assert that the euro and the EU serve Europeans and shield them from crisis. It is an illusion to believe that Europe’s interests can be protected within the iron cage of the Eurozone’s governance “rules” and within the current Treaties. President Hollande’s and Prime Minister Renzi’s method of behaving like a “model student”, or in fact a “model prisoner”, is a form of surrender that will not even result in clemency. The President of the European Commission, Jean-Claude Juncker, said it clearly: « there can be no democratic choice against the European treaties ». This is the neoliberal adaptation of the « limited sovereignty » doctrine invented by the Soviet leader Brezhnev in 1968. Then, the Soviets crushed the Prague Spring with their tanks. This summer, the EU crushed the Athens Spring with its banks.

We are determined to break with this “Europe”. It is the basic condition needed to rebuild cooperation between our peoples and our countries on a new basis. How can we enact policies of redistribution of wealth and of creation of decent jobs, especially for the young, ecological transition and the rebuilding of democracy within the constraints of this EU? We have to escape the inanity and inhumanity of the current European Treaties and remould them in order to shed the straightjacket of neoliberalism, to repeal the Fiscal Compact, and to oppose the TTIP.

We live in extraordinary times. We are facing an emergency. Member-states need to have policy space that allows their democracies to breathe and to put forward sensible policies at the member-state’s level, free of fear of a clamp down from an authoritarian Eurogroup dominated by the interests of the strongest among them and of big business, or from an ECB that is used as a steamroller that threatens to flatten an “uncooperative country”, as it happened with Cyprus or Greece.

A list of draconian new austerity demands handed to the Greek government in Brussels Sunday ignited a global backlash against Germany, German Prime Minister Angela Merkel and finance minister, Wolfgang Schaeuble.

#ThisIsACoup became the top trending hashtag on Twitter worldwide – and is #1 in Germany and Greece.

The tag was attached to tens of thousands of angry comments denouncing Germany’s aggressive demands that the Greek parliament pass new severe austerity laws within days to raise taxes, privatize public assets and cut back on pensions.

Paul Krugman, the Nobel laureate economist, helped promote the hashtag it on the New York Times website:

“This Eurogroup list of demands is madness. The trending hashtag #ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for. “

The weekend showdown came to a head on Sunday night as Eurozone leaders Angela Merkel and President François Hollande of France presented Greece’s prime minister, Alexis Tsipras, with a new ultimatum.

The hashtag originated Sunday evening from Sandro Maccarrone, who is a physics teacher in Barcelona, Spain. He tweeted: “The Eurogroup proposal is a covert coup d’etat against the Greek people. #ThisIsACoup.”

Since the Greek people registered their defiant “no to austerity” at last weekend’s plebiscite, like many, I have been struggling to understand what that vote really means and where this is now heading both for Greece and the rest of the Eurozone. In searching for answers I have found that three different questions are inclined to separate out; questions that involve one another in a vaguely hierarchical fashion a little like Russian dolls. I have therefore decided to try to address each of these nested questions in turn beginning with the outermost first.

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1. Whose fault? (and who should pay?)

“The Greeks have been living beyond their means for years,” said one man, visiting Berlin from Osnabrück, Lower Saxony.

“I used to play in a volleyball team in the 1970s and 80s and we traveled all over the world. I’ve been to Istanbul and I’ve been to Brasil and I’ve never seen a country like Greece.

“The people there simply don’t work enough. I’d see them crowding cafes at four o’clock in the morning.”

“I’m completely on the side of the CDU [Christian Democratic Union]. Where has all the money gone? We pay our taxes, they don’t.” 1

The quotes above were part of an article sent to me by a friend living in Germany – a friend who happens to spend the other half of his time living in Greece. The remarks, he says, perfectly exemplify the sorts of opinions he most frequently hears. The Greeks caused the crisis, they should pay what they owe, and follow the rules like the Germans would. It’s all exceedingly simple, and all extremely badly informed.

Like many ‘good Europeans’, the German people are being held hostage to two falsehoods. One is that the crisis came about primarily because of indolence, inefficiency and impropriety. Put baldly, that Greeks are a bunch of lazy tax cheats. The only part missing here is the word untermensch; the tinge of latent bigotry is unmistakeable.

I have argued against this nonsense many times and so it pains me to have to repeat myself at all. But the facts are there for anyone who cares to look. Figures that unequivocally prove that Greeks work extremely hard: harder on average in fact than Germans do. Their productivity is lower and so perhaps there is an issue over efficiency, and tax revenues are indeed harder to secure, but this is very much a problem that gets far worse as you climb the social ladder (as it does in every society).

In any case, none of this was the actual cause of the Greek “debt crisis” – an offshoot of the wider banking crisis – which in fact originated because corrupt government officials negotiated with corrupt EU officials (unless we believe it takes only one to tango), helped along by corrupt men at Goldman Sachs, when Greece signed on to the euro. None of this will come as news to those who have followed the story closely, even if it is suddenly back in the newspapers again:

Goldman Sachs faces the prospect of potential legal action from Greece over the complex financial deals in 2001 that many blame for its subsequent debt crisis.

A leading adviser to debt-riven countries has offered to help Athens recover some of the vast profits made by the investment bank.

The Independent has learnt that a former Goldman banker, who has advised indebted governments on recovering losses made from complex transactions with banks, has written to the Greek government to advise that it has a chance of clawing back some of the hundreds of millions of dollars it paid Goldman to secure its position in the single currency.

The development came as Greece edged towards a last-minute deal with its creditors which will keep it from crashing out of the single currency. 2

Click here to read the full article in yesterday’s [July 11th] Independent.

The second lie is that the Greek people have ever been bailed out at all:

Only a small fraction of the €240bn (£170bn) total bailout money Greece received in 2010 and 2012 found its way into the government’s coffers to soften the blow of the 2008 financial crash and fund reform programmes.

Most of the money went to the banks that lent Greece funds before the crash.

That comes from a Guardian article, which goes on to point out (as many others have previously done):

Less than 10% of the bailout money was left to be used by the government for reforming its economy and safeguarding weaker members of society.

Greek government debt is still about €320bn, 78% of it owed to the troika. As the Jubilee Debt Campaign says: “The bailouts have been for the European financial sector, while passing the debt from being owed to the private sector to the public sector.”3

Yes, more than 90% of the bailout money went straight back to the creditors – much of it German money to prop up German banks.

As Paulo Nogueira Batista, one of the Executive Directors of the IMF, has recently admitted:

“One of the major problems of the programmes that were proposed was that they [“the Troika”] put too much of a burden on Greece and not enough of a burden on Greece’s creditors. So for example, the first programme of 2010 was presented as a bailout of Greece, but in reality it was more of a bailout of the private creditors of Greece. Greece received enormous amounts of money but this money was used basically to allow the exit of, for example, French banks [and] German banks…”

*

For a more complete analysis, I refer readers to a previous article based around two excellent documentary films made by Harald Schumann and Árpád Bondy. The second of these, On the Trail of the Troika, was first broadcast on March 9th 2015 on ARD (German Public TV) as Macht ohne Kontrolle – Die Troika and has since been uploaded on youtube with both English and Greek subtitles. It is embedded below:

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Parallel to this overarching question of who is responsible for the debt is the question of who should now repay it. To the (wo)man on the street – and especially those auf der Strasse – this tends to be treated as if it were the self-same question, but it isn’t, and for the simple reason that a debt that cannot be repaid will never be repaid. In ordinary life we know this is true, which is why in our private lives we are disinclined to lend money other than to those we most trust. After all, it is very much the responsibility of every creditor to lend their money wisely, and this applies to banks and global institutions no less than it applies to you and me. But there are also international laws determining the legitimacy of debts.

In the case of Greece (and the other Eurozone debtor nations including Spain and Portugal), it is well known that the debts cannot possibly be repaid (as the IMF has recently conceded – for more information see my update on the previous post). There are also grounds for arguing that much of the debt is odious, and so the Greek government is not only justified but legally sanctioned to repudiate all such illegitimate debt:

A committee convened by the Greek parliament has claimed much of the country’s debt of 320bn euros was illegally contracted and should not be paid.

Following an official parliamentary investigation, speaker Zoe Konstantopoulou described the debt as illegal, illegitimate and odious.

Added to this, we also have the postwar precedent set by Greece and Spain amongst others when many nations agreed to the cancellation of German war debts thanks to the London Debt Agreement of 1953:

Needing a strong West Germany as a bulwark against communism, the country’s creditors came together in London and showed that they understood how you help a country that you want to recover from devastation. It showed they also understood that debt can never be seen as the responsibility of the debtor alone. Countries such as Greece willingly took part in a deal to help create a stable and prosperous western Europe, despite the war crimes that German occupiers had inflicted just a few years before.

The debt cancellation for Germany was swift, taking place in advance of an actual crisis. Germany was given large cancellation of 50% of its debt. The deal covered all debts, including those owed by the private sector and even individuals. It also covered all creditors. No one was allowed to “hold out” and extract greater profits than anyone else.

That comes from an excellent article written by Nick Dearden published in the Guardian. As Dearden points out, although this London deal helped pave the way for Germany’s “economic miracle”, the same remedy is entirely withheld from today’s debtor nations whether inside or outside the Eurozone:

The German debt deal was a key element of recovering from the devastation of the second world war. In Europe today, debt is tearing up the social fabric. Outside Europe, heavily indebted countries are still treated to a package of austerity and “restructuring” measures. Pakistan, the Philippines, El Salvador and Jamaica are all spending between 10 and 20% of export revenues on government foreign debt payments, and this doesn’t include debt payments by the private sector.

If we had no evidence of how to solve a debt crisis equitably, we could perhaps regard the policies of Europe’s leaders as misguided. But we have the positive example of Germany 60 years ago, and the devastating example of the Latin American debt crisis 30 years ago. The actions of Europe’s leaders are nothing short of criminal. 5

Unfortunately, today’s neo-liberal belief holds that debt is sacrosanct. So that whereas West Germany was only required to pay for debts out of its trade surplus, and thus its creditors had a vested interest in wishing to see economic growth, the creditors in the current crisis demand their pound of flesh irrespective not only of broader social consequences, but seemingly even of their debtors ability to keep up with repayments.

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2. To Grexit or not to Grexit?

The debate over whether Greece would be better inside or outside of the Eurozone has been ongoing for just as long as the crisis itself. And once again, we can break the argument down into component parts, of which one claim is that the Eurozone per se was an inherently flawed concept that remains utterly unworkable in its current form. This is very possibly the case, although not a subject I feel comfortable discussing – it is beyond my technical understanding. However, whether the Eurozone is ultimately workable or not, and regardless of whatever costs to democracy and national sovereignty might be needed to completely fix it, we can certainly see that this current crisis did not arise from the formation of the monetary union.

Rather, this so-called “debt crisis” began as a banking crisis, and one that can be easily traced back to the American subprime mortgage crisis, the origins of which again, in reality trace back to the financial deregulation begun under Thatcher and Reagan, and then continued by Clinton, Blair and Brown. The subprime mortgage/banking crisis of 2008 never truly ended, and the western financial system only limps on thanks to sporadic bailouts, unlimited QE and zero interest rates. Better understood, and as already discussed above, the so-called bailouts of Greece have been little more than a continuation of the earlier banker bailouts.

Leaving aside the more technical or purely political considerations, the decision facing the Greek government to stay or exit the Eurozone is rather more straightforward. It is a question of economic expediency – and for millions of people, this is quite literally a matter of life and death. So here is what I wrote more than three years ago (it reveals just how little in the debate has actually shifted):

Should the Greeks submit to further the “austerity measures” that have already destroyed their economy and social infrastructure as Angela Merkel and others are demanding, or should they drop out of the Euro and begin tackle their debt crisis by returning to a hugely devalued Drachma? These are the only available choices, as we are all, Greeks included, constantly reminded. […]

So what of the second option – the one that already has the stupid text-style name of Grexit? Should Greece abandon the Euro altogether? Well, firstly, the Greeks cannot be forced to drop out of the Eurozone – or at least there is no recognised mechanism for expelling any member nation. Secondly, it should be noted that the Greek people don’t want to leave the Eurozone. Like most of the peoples of Europe, these days they are broadly enthusiastic about the European project. Added to this, they also clearly recognise the serious risks of trying to suddenly go it alone in such perilous times. Once isolated, the Drachma would be mercilessly attacked by the same predatory banks and hedge funds that are currently threatening to bring down the Euro. The Drachma wouldn’t stand the ghost of a chance.

Which brings us to an impasse. Accept “austerity” or get out! Jump off a cliff or suffer slow death by a thousand cuts. Is there really no genuine alternative for the Greeks?

Yes, Greece could exit, following which it makes perfect sense, of course, to default, and in which case to default absolutely. With financial support offered from elsewhere (the new BRICS bank being the most likely source) they might revert back to the drachma, a move that would instantly improve competitiveness. Grexit would be a shock, but with genuine investment in productive activity and with exports suddenly buoyed by a devalued currency, Greece would survive and steadily grow. Or at least this is how the arguments in favour of Grexit go. And they sound like a pleasant dream. The passing storm, though intense, is quickly over. So if Grexit is so survivable, then what’s been the hold up…? Here is recently ousted Greek Finance Minister, Yanis Varoufakis, laying out the difficulties that would lie ahead:

The threat of Grexit has had a brief rollercoaster of a history. In 2010 it put the fear of God in financiers’ hearts and minds as their banks were replete with Greek debt. Even in 2012, when Germany’s finance minister, Wolfgang Schäuble, decided that Grexit’s costs were a worthwhile “investment” as a way of disciplining France et al, the prospect continued to scare the living daylights out of almost everyone else.

By the time Syriza won power last January, and as if to confirm our claim that the “bailouts” had nothing to do with rescuing Greece (and everything to do with ringfencing northern Europe), a large majority within the Eurogroup – under the tutelage of Schäuble – had adopted Grexit either as their preferred outcome or weapon of choice against our government.

Greeks, rightly, shiver at the thought of amputation from monetary union. Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.

To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available. 6

All of which supplies reasons enough to be cautious. However, the problem does not end with the reprinting of the drachma. Because by allowing Greece a comfortable ride, whether via any means of exit from the Eurozone or else through debt restructuring, a precedent will be set that those in the other debtor nations would be keen to emulate. Which means that Germany (as well as the EU Commission) have, as Varoufakis very candidly puts it, “an interest in breaking us”:

This weekend brings the climax of the talks as Euclid Tsakalotos, my successor, strives, again, to put the horse before the cart – to convince a hostile Eurogroup that debt restructuring is a prerequisite of success for reforming Greece, not an ex-post reward for it. Why is this so hard to get across? I see three reasons.

One is that institutional inertia is hard to beat. A second, that unsustainable debt gives creditors immense power over debtors – and power, as we know, corrupts even the finest. But it is the third which seems to me more pertinent and, indeed, more interesting.

The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state.

And there’s the rub. After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.

What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.

Because Finance Minister Varoufakis knows the economic field of game theory, lazy pundits have for months opined that he is playing “chicken” or “poker” or some other game. In Heraklion two weeks ago, Varoufakis denied this as he has done many times: “We’re not bluffing. We’re not even meta-bluffing.” Indeed there are no hidden cards. The Greek red lines – the points of principle on which this government refuses to budge – on labor rights, against cuts in poverty-level pensions and fire-sale privatizations – have been in plain view from day one. 7

As we await the decision of the Eurogroup, much of the mainstream media has been quick to draw attention to what it describes as the Greek government ‘climbdown’. So we hear how they have backed down on taxation, on pensions, on public spending and on privatisation. Following on from the dramatic “OXI” vote of last Sunday, it is quite easy to feel deflated by this. Indeed, the harshest critics of Tsipras (Varoufakis is out of range) – critics both from left and right – say that Syriza have managed to let a ‘no’ slip into a ‘yes’.

But then the voices that dominate the mainstream media have an axe to grind; the usual neo-liberal axe. So when they play up Syriza’s ‘climbdown’ we should look rather carefully into the details (I will offer further thoughts on this at the end). Meanwhile, the alternative voices who say that Greece ought to have followed Iceland’s example are missing a great many points of significant difference between the two nations: the size of populations, the make-up of their respective economies, and the rather important fact that Iceland were never part of the Eurozone or stuck in any kind of currency union.

Professor Steve Keen, who is Head of the School of Economics, History and Politics at Kingston University in London and author of Debunking Economics, put the whole matter into a useful context in an interview he gave on George Galloway’s RT show Sputnik [also July 10th]. Greece’s position is exceptionally weak and isolated, Keen says, so when it comes to Grexit:

“[Syriza] are afraid of the transition. And they are afraid of just how viable they are going to be once they are back on a floating exchange rate again. But I don’t think they’re going to have a choice.”

And as for how well Syriza have played their hand, Keen replies:

“Well, Yanis won’t mind me saying this now. He wrote to me saying they’re basically… we’re being subjected to a putsch. And he said, basically the attitude of the European Union was that they didn’t want Syriza to win, so let’s get rid of them. There was a political campaign right from the outset to break their backs and to either force them to become like the party they replaced [i.e., Pasok] or to drive them out of office. And in that sense the referendum was quite a surprise move – [the opponents of Syriza] weren’t expecting it – and now, of course, they’re treating it as though it didn’t happen… You did well. It’s a pity you voted the wrong way. But apart from that congratulations on winning. Now let’s go back and do exactly what we were doing last week.”

But if, as Steve Keen, Yanis Varoufakis and many others fear, the talks do indeed fail, and if only because Germany (principally) refuses to budge, then those who have called for Syriza to look for alternatives sooner will feel vindicated. However, in response to this, it needs to be pointed out that although Syriza may fail to stall a Grexit, during the six months they have unquestionably strengthened their position politically. In Greece, rather than shrinking away, their popularity has grown, which is vitally important if you are keen to maintain your democratic mandate. Outside of Greece, Syriza has also been winning hearts and minds. By contrast, and in spite of whatever else happens next, the reputation of the EU has certainly been damaged. As Steve Keen says:

“They [Syriza] can survive being pushed out of the euro… one thing you can pick up from the Greek reaction to that election was that there’s a sense of pride come back. Because being put through an experience like that – people talk about they’re responsible for the situation [and so] they should pay the price (I’ve heard that amongst some of my Conservative friends recently). They don’t realise just how long the punishment has been. Just how severe and just how demoralising it is to have no sense of a future, which is why the suicide rate has increased by a factor of five or six in Greece since this whole thing began.”

*

There is, however, an alternative argument against Alexis Tsipras and Syriza that is more incriminatory, and it is one that has followed both since long before the party had even been elected to power. In short, it is the opinion that Syriza itself is phoney, or if not Syriza as a whole, since this is a leftist coalition of different factions, then its leader Tsipras along with former Finance Minister Varoufakis – indeed, some go so far as to insinuate that both Tsipras and Varoufakis have been nothing less than saboteurs…

The World Socialist Web Site calls on Greek workers not to give any political support to Syriza. There is no party in this election that represents the interests of the working class.

That was the position of the International Committee of the Fourth International (ICFI) as outlined on their website wsws.org on the eve of the Greek elections.

Having been ignored by the Greek people, the World Socialist Web Site, courtesy of International Committee of the Fourth International, then followed up with this:

It took just hours for the leftist pretensions of Syriza, (the Coalition of the Radical Left) to be exposed following its victory in Sunday’s Greek general election.

On Monday morning, Syriza leader Alexis Tsipras held talks lasting barely an hour with Panos Kammenos, leader of the right-wing, anti-immigrant Independent Greeks (ANEL). Following the talks, Kammenos announced that the Greek government would be a Syriza-Independent Greeks coalition.

Syriza had been caught red-handed, but it gets worse:

Syriza’s coalition with ANEL was prepared well in advance. In March 2013, Syriza entered into a “front” with ANEL based on efforts to save the Cypriot banks with aid from the European Union (EU).

Following Monday’s talks, the Protothema newspaper reported that “Syriza and ANEL have already reached an agreement on the issue of the Greek president and ANEL’s red lines on national issues will be respected by its leftist coalition partner.”

Was this true? Well, yes. In fact, my good friend from Germany who was then living in Naxos told me that people in Greece had been perfectly well aware of this alliance and that no-one was especially bothered. It is a marriage of convenience. But why believe me? This is what Stathis Kouvelakis, a prominent member of Syriza, said of the coalition with ANEL:

This alliance has been, I’m afraid, a forced and quite pragmatic type of choice, devoided of any grand strategic design. And since Syriza’s offer of an alliance with the other force of the radical left has been categorically rejected by the latter, this possibility has been explored since a while and was therefore easy to materialize once the election result was known.

Click here to read more at Richard Seymour’s popular blog Lenin’s Tomb.

Now everyone is perfectly entitled to their opinion about Syriza and Alexis Tsipras. If they believe that they are fakers then they should say so. But there is something deeply self-destructive about certain elements within the left. The reason is simple. For half a century and more as the left has been remorselessly beaten into submission by very powerful corporate and oligarchical interests, this sustained period of bruising defeats has created a feeling of resignation and a loser mentality, creating schisms that were so memorably lampooned by Monty Python’s Life of Brian.

But there’s also another point that desperately needs hammering out, which is the radical left’s obsession with intellectual legitimacy. Marxists, Trotskyists, and even Maoists (the madness of some on the far left simply knows no bounds!) who scrutinise and disparage one another over matters of conjectural doctrine, dismissing rival camps on grounds that alternative interpretations to their own are pseudo- and bourgeois. Meantime, the world moves on, and beyond the narrow confines of these inner party squabbles, there is no effect whatsoever on any practical advancement. The bigger joke being there are few preoccupations even half as petty-bourgeois as splitting hairs over Marx and Engels; one the son of a Jewish lawyer, the other the eldest son of a wealthy German cotton manufacturer.

For few in the proletariat care one jot for the ideological legitimacy of the left (or the right for that matter) – and why would they? They have more pressing concerns like putting food on the table and a roof over their head: a reliable income and fortnight’s holiday abroad are the main concerns of the ordinary Joe. Surely then, those on the left, especially the radical left, ought to strive to put programme above dogma. Since the masses, however miserable, will never be roused and politically animated by dry theory. And isn’t this where the revolution is expected to spring forth from?

For so long as the left keep bickering on about who is more properly socialist, then the right will easily steal in. Because the right, especially at its vilest extremes, is devoid of the same intellectual hang-ups, which is why, even when their closet intention is to coerce and oppress the poor and the workers by means of sectarian division, the right manages to gain so much traction amongst the ranks of the lower classes. The left needs to learn this lesson quickly; those self-aggrandising gangs of thugs like Golden Dawn are sharpening their knives and once Syriza are seen to have failed, the next act may be a diabolically familiar one.

*

Additional: Playing the long game

Greece will hold a referendum on a new European Union aid package intended to resolve the country’s debt crisis, Prime Minister George Papandreou says.

That was November 2011 and the BBC news report continues:

Analysts say a referendum could derail the wider deal on the euro debt crisis.

Adding:

Opinion polls in Greece show that most people do not support the austerity deal. 8

Of course, this was a referendum that never actually happened. Instead, and after pressure was applied during the G20 meeting at Cannes, Papandreou quickly backed down:

Speaking after the G-20 meeting in Cannes, US President Barack Obama questioned Prime Minister George Papandreou’s proposal to hold a referendum on the country’s eurozone debt deal and applauded New Democracy leader Antonis Samaras for backing last week’s Brussels agreement.

“We came to Cannes to discuss with our European friends how they will move forward and build upon the plan they agreed to last week to resolve this crisis,” he said.

Obama said the “actions of Papandreou and the referendum issue got a lot of people nervous.” He added that the plan European leaders presented last week is “still the best recipe.” He commended Samaras for saying he would support the bailout after the referendum proposal was dropped.

Dutch Prime Minister Mark Rutte welcomed Papandreou’s decision to withdraw the referendum but warned that the eurozone might lose patience with Athens. “It was a bizarre proposal,” Rutte said. “We think it’s of great importance to the eurozone that we prevent Greece from going bankrupt. But in the end, the euro is more important than Greece’s membership of the eurozone.” 9

It was an episode that led to Papandreou’s resignation and the appointment of former Governor of the Bank of Greece and Vice President of the ECB, Lucas Papademos, as interim Prime Minister. Following which, the “austerity” went on, the “debt crisis” deepened, and still the Greeks were yet to have a real say in what was happening to their country.

Almost four years and multiple general strikes later and the new Syriza-led government finally gave the people of Greece the referendum previously denied them. Although the detailed choice was a complex one, it boiled down to more or less straightforward ‘yes’ or ‘no’ – and not ‘yes’ or ‘no’ to staying within the Eurozone as so many have disingenuously claimed, but a ‘yes’ or ‘no’ to the latest bailout deal and further “austerity”:

In fact, only the “No” can save Greece – and by saving Greece, save Europe. A “No” means that the Greek people will not bend, that their government will not fall, and that the creditors need, finally, to come to terms with the failures of European policy so far. Negotiations can then resume – or more correctly, proper negotiations can then start. This is vital, if Europe is to be saved. If there ever was a moment when the United States should speak for decency and democratic values – as well as our national interest – it is right now. 10

So wrote economist James K. Galbraith prior to last weekend’s momentous referendum. And what he says is correct. The Greeks have indeed voted to stay in Europe and the Eurozone, having never offered Syriza any mandate to leave. As it transpires, they may now be forced out, or at the very least, forced into another general election. Syriza may then be obliged to stand on a ‘we will leave the euro ticket’, which, and as popular as Syriza are, would mean an election that they would currently be unlikely to win.

But then, as my friend in Germany points out, leaving aside the Greek concessions for a moment, this weekend’s deal pivots upon massive debt restructuring/cancellation, which is why Syriza have felt compelled to offer Germany the chance to wrestle some kind of victory, whilst returning to Greece as winners too. If a deal can be struck, then certainly hardliners on both sides will come away disappointed, and this is one reason any deal may very likely fall through.

Discretion is sometimes the better part of valour, and there are many occasions when it is necessary to take a step or two backwards in order to regain your balance again. Perhaps the very best Syriza can achieve right now, given the intransigence and bullying of the anti-deal voices within the Eurogroup, is to play for time. Right now, the banks in Greece desperately need to reopen in order to restore normality. For ordinary life must go on. Meanwhile, agreeing terms on privatisation and so forth is one thing, whereas implementing such deals is another thing altogether, because as my friend in Germany reminded me “… it’s Greece after all.”

The ECB’s threat to cut off funding to Greece’s banks is nothing less than a calculated but desperate act of financial war intended to provoke the collapse of the Greek banking system in order to bring about a regime change. It is an attempted coup d’état against the democratic leftist Syriza government instigated by unelected technocrats without a mandate from anyone. This is a critical moment. If we believe in social justice and real democracy then it is essential that we show solidarity with the people of Greece.

In Britain, the political alliance Left Unity have issued the following message of support and are organising protests commencing tomorrow [Monday 29th] in Trafalgar Square and at other yet to be decided locations across the country:

Dear Alexis Tsipras,

I am writing to send solidarity greetings from Left Unity, the new party of the left in Britain, to you and to the comrades of Syriza.

Your principled stand against the blackmail and diktats of the European financial institutions is an inspiration. You have exposed the rotten core of European capital to the light of democracy and are fighting for the dignity of the people of Greece.

We are well aware that your struggle is of momentous importance for all the people of Europe. Your struggle is our struggle and we stand by you as you prepare for the referendum and as you face the outcome.

Together we say No to the Troika and the blackmail and we wish Syriza and the people of Greece a great victory.

Q: At the onset of the crisis, the former Finance Minister Papaconstantinou likened the Greek economy to the “Titanic” heading straight for the iceberg. Do you also feel as if you are standing on the bridge of the “Titanic”?

A: No. The “Titanic” sank a while ago. We’re steering the lifeboat and throwing lifebelts to those drowning around us.

This was the response Greek Prime Minister, Alexis Tsipras, gave in an exclusive interview to German magazine Stern. 1

*

“austerity”, what is it good for…?

As the economies of the western world continue to flounder, with Germany too (Europe’s last remaining industrial powerhouse) reeling just a little from the greater crisis, debt reduction is still regarded as the key component to any recovery programme. To meet these ends, all our governments have been overseeing huge cuts in public services, welfare payments especially gouged, in concerted efforts to reduce their deficits. This death of our societies by a thousand cuts of “austerity” being the recommended cure which mainstream economists have called for, and though alternative voices have no less insistently pointed out that “austerity measures” are inherently counterproductive (since they reduce tax revenues), these dissenting voices continue to be marginalised.

A few years ago Thomas Herndon stepped forward. Herndon, a university student and thus less rigid in his outlook, caused quite a rumpus – as a consequence, he has since been rewarded with his own wikipedia entry. This sudden burst of fame coming after he inadvertently stumbled upon grievous errors in an influential paper entitled Growth in a Time of Debt (published 2010), authored by eminent Harvard professors, Carmen Reinhart and Ken Rogoff – Rogoff, a former chief economist at the IMF.

In their paper, Reinhart and Rogoff had purported to show that whenever national debt is in excess of 90% of GDP, growth is “roughly cut in half”. This correlation had subsequently been quoted by policy-makers across the world, as well as routinely served up as empirical proof that there was simply no viable alternative to our continuing “austerity” programmes. Most notably, perhaps, former EU Commissioner for Economic and Monetary Affairs, Olli Rehn, leant rather heavily on Reinhart and Rogoff’s work.

But then doubting Thomas Herndon decided to check their figures for himself. And, to his own astonishment, discovered that one of the most frequently cited justifications for the imposed “austerity” strategy actually rested upon a few careless mistakes on a spreadsheet!

[Herndon had] spotted a basic error in the spreadsheet. The Harvard professors had accidentally only included 15 of the 20 countries under analysis in their key calculation (of average GDP growth in countries with high public debt).

Australia, Austria, Belgium, Canada and Denmark were missing.

Oops.

Herndon and his professors found other issues with Growth in a Time of Debt, which had an even bigger impact on the famous result. The first was the fact that for some countries, some data was missing altogether. 2

Taken aback by this unexpected challenge from a novice, Reinhart and Rogoff felt obliged to issue a response:

We are grateful to Herndon et al. for the careful attention to our original Growth in a Time of Debt AER paper and for pointing out an important correction to Figure 2 of that paper. It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful. We will redouble our efforts to avoid such errors in the future.

Confessing to their blunder, but keen also to defend their professional reputation, they casually added:

We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work.

There has since been no halt to the economic gouging and scourging of Europe. Despite the more immediate evidence coming out of Greece, Spain, Portugal, and every other place where such “measures” have been most strongly administered, that prove “austerity” isn’t working. And even when all other factors, social and human factors, are set aside, and success or failure is judged within the exceedingly narrow terms of its proponents, we see that the sovereign debt burdens in all these countries have continued to rise. 3

Given such a lack of success, the response is obviously to double-down. Apply more stringent “austerity”; if the original cuts have failed, then they needed to be deeper. In former times the doctors would just have ordered more leeches, or the priests would have demanded a tightening of the cilice. Tougher love. Just too bad if the supposed antidote is the worst of the poison, because orthodoxy asserts that, poison or not, it is the best and only remedy. The really important thing is to never let mere facts (especially incalculable costs like human misery) get in the way of a damned fine economic theory!

*

whose debt is it anyway…?

But how did these sovereign debt burdens arise in the first place? Or put another way, the related question might be asked, to whom are the debts actually owed? This second question is rarely broached, but in 2013 award-winning business journalist, Harald Schumann, sought a direct answer to precisely this question. He journeyed across the stricken eurozone countries and poised the question to those working inside the so-called “Troika” (IMF, European Central Bank and EU Commission) as well as significant politicians, economists, lawyers, journalists and even the occasional central banker. The result, a brilliantly constructed documentary entitled The Secret Bank Bailout, is embedded below:

I highly recommend watching the documentary in full, but would also like to offer a brief overview.

Schumann asks which parties were actually rescued by the bailouts, and finds that contrary to what ordinary Germans were led to believe (this is a German documentary originally titled Staatsgeheimnis Bankenrettung) the people living in the poorer eurozone states received barely a penny of this apparent ‘foreign aid’ – our own media perpetuates the self-same falsehood. Because rather than letting the creditors and the banks absorb their speculative losses, these financial institutions were deemed “too big too fail” and protected. So the bailouts were never used to support the governments, but always passed on to the creditors of major banks, especially ones in Germany and France, who had taken the unwise risks that caused the crisis – the original losses often due to property bubbles in places like Spain and Ireland. (The whole notion of “too big too fail” is, of course, a contravention of even the most basic tenets of free market capitalism.)

And who have been the ultimate recipients of all this bailout money? Well, that has remained a closely guarded secret. We ought to be asking why, of course, which Schumann’s documentary does. He also seeks to penetrate the secret itself.

In the next sections, I will present a further overview comprising highlights of Schumann’s discoveries, and following the same route (then a little beyond it) as he investigated country by country, across the blighted eurozone.

*

Ireland

The Irish people have been forced to take on 70 billion euros of additional debt to pay off foreign creditors.

Stephen Donnelly, independent Irish MP, says that the ECB held the Irish government virtually at gunpoint:

“The suspicion is that European Central Bank said ‘You will continue to pay these bondholders [the mainly foreign creditors] to whom you owe nothing or we will pull the emergency funding out of your banking system, thereby collapsing your banking system, thereby collapsing your economy.’ To me that is gunboat diplomacy… [with a little prompting] or blackmail. It is a very, very serious threat for a central bank to have made in actually forcing a sovereign nation to surrender its sovereignty to bailout an independent group of investors. Was the ECB acting illegally?”

Brian Hayes, Irish Deputy Minister of Finance:

“Of course that was a position that was foisted on the Irish people as a result of the decisions taken… It was the majority view of the ECB that this money had to be paid back.”

And where did the Irish bailout money go? A full breakdown of the bondholders of Anglo Irish bank is available here. (The list was publicly released by blogger Guido Fawkes.)

Germany has the most with 15 of the bond holders. Who between them hold 5.3 trillion euros.

France is next with 10 bond holders. Who have an estimated 4 trillion.

The bondholders include some of the world’s largest banks: Deutsche, Soc Gen, Barclay’s, PNB Paribas, UniCredit (who don’t appear on the list but own Pioneer Investments) and Wells Fargo (also not on the list but who own European Credit Management). There is also Goldman Sachs and Rothschild Group. 4

As Harald Schumann says “It’s like a Who’s Who of the financial world.”

Back to Stephen Donnelly:

“No country on earth in history has ever paid that amount of money back without having its own monetary policies… you gradually bleed, year on year on year. And now you really do depend on Europe. There was a quote by Nelson Mandela where he said something like: ‘It is the greatest tragedy of the human condition that we must endure so much pain before arriving at a compromise that we always knew was going to be needed.’”

The first lesson, therefore, is that the solution – any practicable solution – has to include debt cancellation.

*

Spain

The Spanish people have been forced to take on 40 billion euros of additional debt to pay off foreign creditors.

Harald Schumann confronted Luis De Guindos, Spanish Minister of Finance, with advice he was given Stephen Donnelly that they would be better to let (some of) the banks fail because “banks have to be allowed to fail”. But Luis De Guindos disagrees:

“I think that the Irish situation is totally different from the Spanish situation. As I have said before, the size of the balance-sheet of the Irish banks in comparative terms with the GDP of Ireland was three times larger than the case of Spain. So I think that while in the case of Ireland the cost of recapitalising the banks has been above 20% of the Irish GDP, in the case of Spain we are talking 4% of GDP. So it’s a totally different situation and it’s not comparable at all.”

But economist Juan Rallo disagrees with De Guindos, and beginning with the figures themselves: “The real figure is not 40 billion, but 80 or 90 billion…”

And who are the creditors of the Spanish banks (particularly Bankia)? When Schumann manages to get hold of a list (thanks to “friendly people that help me”) he discovers that Deutsche Bank again features prominently.

Juan Moreno is a lawyer working with the 15M protest movement, who filed the lawsuit for the closure of Bankia to save the Spanish taxpayers from a bailout. When asked if the system would have collapsed, Moreno says:

“If you were to drop Bankia it would probably lead to the collapse of other banks, but not the big banks like BBVA, Santander, La Caixa, [Banco] Sabadell, or [Banco] Popular.”

Back to Luis De Guindos:

“A money market economy with fiat money is unstable. And we have an example that we let the banks go down… it was the Great Depression. It was the worst depression we had over the last century.”

Juan Moreno’s response:

“It’s all scaremongering. I don’t want that, I want numbers. I want to know what would really happen if they were to go bankrupt… With what we know now we would say this bank is beyond saving. We can’t continue to pour billions of euros into it. The creditors must take losses…

“The trial uncovered that the bank figures were falsified by upper management, but now we discover that the same had happened at the lower management levels. So a banking culture developed where employees were rewarded with bonuses so that the upper level did not realise how bad things were at the local branch level… The judge said that there was indeed public control of the bank, but the government supervisors played along. Letting the fox guard the hens is good for nothing.

“They’re all criminals: those in charge of Bankia and the public supervisors. If they’d let the savings banks go bankrupt, we would have found out what the politicians did with the money. Much of the debt that cannot be repaid is money that went to political parties, to city administrations, for work in the autonomous southern regions to companies connected to the government. These revelations would have made the political class disappear.”

So what is Moreno’s advice to the Germany citizens who are paying to prop up this corrupt system…?

“Numbers. The balance-sheet. It’s simple. You have to know the facts and apply the laws.”

*

Cyprus

Meanwhile, depositors in Cypriot banks (savers as opposed to taxpayers) had more than 6 billion euros seized overnight in a so-called bail-in to pay off foreign creditors. This has crippled many businesses and stifled economic growth in a different way.

Panicos Demetraides, Governor of the Central Bank of Cyprus:

“It’s a change from past bailouts that we have had to bail-in on this occasion [from] uninsured depositors in the two big Cypriot banks. The burden of this bail-in has been borne partly by non-residents, but also partly by residents, Cypriot companies and households. About two-thirds of the burden has been borne actually by non-residents and one-third by residents.”

But as German MP Gerhard Schick (Green Party) explains:

“The European Central Bank allowed the Cypriot Central Bank to give money to banks in Cyprus even though they were insolvent. That’s a real mistake because then non-functioning structures are upheld and taxpayers’ money – and that’s what we’re talking about with a central bank – is endangered. In this way the ECB slowed down the rescue programme and made it possible for many creditors to withdraw their money and invest it elsewhere… The ECB was a creditor acting in self-interest to protect its own money. This conflict of interest should never have been allowed to happen, but it did because central bank money was put into bad banks.”

Back to Panicos Demetraides:

“Certainly the delays offered more informed investors [the chance] to protect their own investments. And they put the less informed investors at a disadvantage.”

Does this mean the ECB allowed other European banks time to withdraw their money? That must be some sort of rumour, says Demetraides. It is a rumour that must persist until there is an independent investigation, but as Gerhard Schick points out:

“The problem is that the ECB is a closed shop, and neither the European Parliament nor national parliaments are really able to call it to account when it breaks the rules.”

Harris Georgiades, Cypriot Minister of Finance:

“For us it was a take it or leave it situation. A decision that we accepted under pressure, and with no time to negotiate extensively. Essentially both of our kneecaps have been broken, and now we are asked to run.”

*

Greece

Greece entered the crisis with a debt-to-GDP ratio of 110% and with around 10% unemployment. It was then put through an “austerity programme” supposedly designed to tackle the debt. Five years and several thousand suicides later, unemployment currently stands at 30% and debt-to-GDP is at around 180%.

This tremendous spike in debt remains in spite of ‘haircuts’ known as the Greek “Private sector involvement” or PSI, the first announced in July 2011, and quickly followed by PSI Mk2 (after PSI Mk1 failed), which involved a impressive sounding 50% reduction in the face value of Greek government bonds (GGB).5 But then, as Yanis Varoufakis, current Greek Finance Minister, but as then a lowly Professor of Economics, wrote soon after:

In short, and so as not to overlabour the point, PSI Mk2 is dead in the water. The shenanigans of the shadow banking sector (which, lest we forget, includes not only the hedge funds but also, remarkably, the ‘proper’ banks shady Special Vehicles) plus the predictable deterioration of the Greek economy have put paid to it. The negotiations may go on for a little while longer, the announcement of a brilliant agreement may be made but, in truth, the idea that the Greek haircut will put Greece’s debt-to-GDP ratio back on a course towards 120% has sunk without trace. And if you need hard evidence for this, the European Summit of 9th December provided it even before 2011 was seen off: Officially, Europe’s great and good announced the end of PSI as a policy of the new ESM; Europe’s future central, permanent bailout fund. It had all been a mistake, they seemed to confess. 6

Greece has never been bailed out, only the European banks (well over 90% of the bailout money returning to them), and likewise the ‘haircut’ actually caused more problems than it solved. In particular, it permitted the looting of social security and public pension funds that are mandated by law to invest in government bonds – the following is taken from a special report published by Reuters:

Greece’s pension funds – patchily run in the first place, say unionists and some politicians – have been savaged by austerity and the terms of the international bailout keeping the country afloat.

Workers and pensioners suffered losses of about 10 billion euros ($13 billion) just in the debt restructuring of March 2012, when the value of some Greek bonds was cut in half. That sum is equal to 4.6 percent of the country’s GDP in 2011.

Many savers blame the debacle on the Bank of Greece, the country’s central bank, which administers three-quarters of pension funds’ surplus cash. Pensioners and politicians accuse it of failing to foresee trouble looming, or even of investing pension fund money in government bonds that it knew to be at high risk of a ‘haircut’ – having their value reduced. 7

In June 2014, Yanis Varoufakis was interviewed by Harald Schumann. Excerpts would feature in another collaboration between Arpad Bondy and Schumann; their follow-up documentary The Trail Of The Troika (in German, Macht ohne Kontrolle – Die Troika), which plotted another route across the continent in order to show how “austerity measures” have utterly failed to rescue the eurozone economies, and how in the process “the Troika” has also flagrantly breached its own European treaty regulations. Unfortunately, an English version of this more recent documentary is at present unavailable on youtube or elsewhere (so far as I can ascertain – but I will certainly embed a version as and when I find one). Meanwhile, uploads of the various interviews filmed during its making are now freely available, and embedded below is Schumann’s unabridged interview with Varoufakis, of which I have again selectively transcribed some of the answers he gave last summer:

What was the bailout for? The bailout was not in order to bail Greece out. Greece was never bailed out. The bailout loan that was extended in May of 2010 had a very singular, simple purpose. It was to transfer banking losses from the asset books of banks, not only Greek ones, but also French ones and German ones, onto the shoulders of the taxpayers. Initially the Greek taxpayers – because they knew that these shoulders were too weak to bear those losses, eventually it was always part of the plan to transfer them onto the shoulders of the German, and the French, and the Dutch and the Finnish taxpayers. And “the Troika” is here supervising this sinister transfer. [5:45 mins]

Smart people in Brussels, especially in Frankfurt, and of course Berlin, knew in May 2010 that Greece would never be able to repay its debts. They knew that again in the Spring of 2012 when they extended the second loan. They know it again now. In their minds they have already written off a very large bulk of the billions and billions that was given to the Greek state to give to the Greek banks and to give to the rest of the banks. All other things being equal, of course, “the Troika” would much rather more money was repaid than less money. But all other things are not equal. At this very moment in time, as we speak, while the Greek banks have huge black holes that we all know, even though they are not being admitted to, something similar is happening in the rest of the eurozone. Deutsche Bank, Finanzbank, BNP Paribas are skating on thin ice. They will never admit to it. And part of the angst and of the anxiety of the powers in Brussels, in Frankfurt, in Berlin, is how not to admit to the German, to the French, to the Dutch, to the Finnish people, that their banking sector was never really put back on an even keel. 8 [7:15 mins]

In 2010, what they had done was this: they lied to the Greek people and to the German people. They said to the Greek people: We have avoided bankruptcy. And they said to the German people that the Greeks, they were waivered, now we are going to punish them with austerity. But we will lend them the money because European solidarity demands that. In reality, what they were doing was transferring banking losses from the bankers – the European bankers, all of them – onto the shoulders first of the Greek taxpayers and eventually onto the German taxpayers, because the Greek taxpayers could not shoulder all of this money.

So they had lied to the German taxpayers. They said: We are not going to haircut the Greek debt. They were always going to haircut the Greek debt. They knew it. What they did with first bailout loan was to shift that big bulk, a 110 billion, from the bankers’ loss book onto the shoulders of Europe’s taxpayers. And then, after that had been effected, of course then they had to haircut – to do what they said they were never going to do – and who did they haircut? They haircut the small bondholders and the pension funds… So the PSI, the second bailout, the haircut of the private sector, was part of the original process of shifting the burden of adjustment and the cost of the crisis from the shoulders of those who caused it, onto the shoulders of those who didn’t cause it in Greece and in Germany. And all that in the name of European solidarity. And then they wonder why right-wing parties of the extreme part of the spectrum are winning power – or, at least, winning seats in the European Parliament. [21:30 mins]

Asked whether he thought the 2008 crisis had been caused as a result of incompetence or due to a more deliberate act of conspiracy, Varoufakis replied:

It wasn’t a conspiracy. It was a very simple operation: How do we stay in power? Mr [Jean-Claude] Juncker said it. Once he admitted: we know what needs to be done, we just don’t know how to do it and remain in power. Now don’t forget that before 2008, 2010, all parties of government, whether they were Christian-Democratic, Social-Democratic, it doesn’t matter. They had developed this extremely close relationship with the financial sector. They had looked at the financial sector as the cow that would bear the milk from which they would feed all, not only their political parties and careers, but also the welfare state – from the point of view of the Social-Democrats.

There was a kind of Faustian bargain between our politicians and bankers. We will let you do what you want, and you pay us a small amount proportional in order to fund our states. So when the crisis hit – which was completely unexpected for them – they had neither the analytical power nor the moral authority to go to these bankers and say: You know what, you’re out. You’re bankrupt, we’re taking over the banks… 9 [24 mins]

Finally, here was what Yanis Varoufakis, the economist (and not yet Finance Minister) said when asked for “any realistic proposal [to] how the dire economic situation in Greece can be improved”:

Well, we have to stop doing what we are doing and do something quite diferent. And there are two levels at which you should see this, because let’s not forget that once we have a monetary union you can’t talk about the overcoming of the crisis in one part of it in isolation to the others. It would be like talking about how South Dakota would escape the Great Depression in 1933 without the rest of the United States going through the New Deal. So we need a New Deal for Europe… 10 [32:30 min]

But, I have to insist: The solution must be European, because the crisis is European. And there are things we can do within two weeks to end this euro-crisis without violating any of the European Union treaties as long as we have the political will to do it. 11 [34:30 min]

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there is a better alternative… (and always was)

Q: Your Finance Minister Varoufakis said that he is not afraid of an Armageddon.

A: He said in parliament: if you enter into negotiations, you are not seeking a breakup. But you have to keep a breakup in mind as a contingency. I share this view.

Q: So you have a Plan B in case Greece does decide to exit from the single currency?

A: We don’t need a contingency plan because we will stay in the eurozone. But we won’t achieve this objective at the expense of the weak – like our previous government.

On April 16th, Varoufakis was invited to speak at a press conference hosted by the Brookings Institute which is based in Washington. In answer to a question about being trapped in a position where the Greeks are left with little alternative but to default, Varoufakis replied:

I would willingly, eagerly and enthusiastically accept any terms offered to us if they made sense. I would have no problem with the Memorandum of Understanding if it was founded upon a reform programme that attacked the worse cases of rent-seeking in Greece, and made the reforms that were necessary in order to enhance efficiency and social justice. If it came for the planet Mars, if it came from Berlin, if it came from Brussels, if it came from Portugal, from Slovakia, I don’t care which, I would have embraced it. The problem we have with these conditions – you know, the take it or leave it conditions – is not so much the authoritarianism, it is that fact that we’ve tried that medicine and it hasn’t worked…

It is almost precisely three years ago since I wrote a post entitled ‘austerity’ or ‘Grexit’: is there really no better alternative for Greece? There have since been more than two and a half years of unrestrained “austerity” (prior to Syriza’s victory), a “take it or leave it” Hobson’s choice, which has deepened the crisis not only in Greece but across the entire eurozone. ‘Grexit’ has never been a realistic alternative, and as Syriza have maintained from the outset, they have no intention whatsoever of ditching the euro. So ‘Grexit’ becomes ‘Grexident’, in other words, an impossibility. Because any accidental Greek exit can only occur if it is accidentally on purpose, and that would mean ‘Grexpulsion’ – a term the mainstream has yet to adopt for obvious reasons.

In Washington, Varoufakis was once again unequivocal about Syriza’s position:

“Toying with ‘Grexit’, which is something we don’t do – we are refusing to discuss it, because as I have said before even worrying about it is like worrying about being hit by a comet in a universe in which comets are attracted to you if you are worried about them – toying with ‘Grexit’ and ideas of amputating Greece is profoundly anti-European because anybody who claims that they know what the effect of a ‘Grexit’ is, are deluded.” [52 mins]

*

Which brings us to an impasse. Accept “austerity” or get out! Jump off a cliff or suffer slow death by a thousand cuts. Is there really no genuine alternative for the Greeks?

Well, the answer to that question actually depends upon what you value. If you think that all debts are sacrosanct, then it necessarily follows that the Greeks must go on paying the banks to their bitter end. That the debt is unpayable doesn’t matter. That the debt is the consequence of so much ineptitude and malfeasance within the banking system doesn’t matter either. The Greeks must cough up because otherwise the chaos will worsen (or so we are again constantly given to believe). But if you value human life above money, and recognise that debts that cannot be repaid will never be repaid, then you can begin to think more constructively. In fact, the alternative becomes immediately and blindingly apparent. Since a debt cancellation will inevitably come sooner or later, the only real question is how much longer must the Greeks be punished in the meantime.

A way-out of all this mess is entirely possible. It doesn’t involve “austerity” and does not necessarily require a Greek exit from the eurozone. What is needed is simply an end to the bottomless banker bailouts and then new money being made available for reconstruction projects and other productive enterprise within Greece, Spain and elsewhere. Such a ‘New Deal’ injection is unlikely to be offered by the IMF, and neither will it be supported by the likes of Angela Merkel. But it can be fought for by the Greek people themselves, and in this battle to stop the wanton destruction of their nation, as fellow Europeans we should stand with them, recognising that the same aggressive financial interests that have already eviscerated Greece, will be pillaging our own lands soon enough.

The paragraphs above are taken from the post I wrote three years ago – yet so little has significantly altered that it remains pertinent enough to repeat it.

Back to Varoufakis who puts flesh on those barest of bones regarding the ‘New Deal’ option for Europe (and presenting the way ahead without any recourse to deficit spending by governments – so heretical to the neo-liberals):

Europe as a whole, the eurozone as a whole, is typified not only by a mountain of great private and public debts, which we do have. But there is another mountain hiding behind it: a huge mountain of idle savings with nowhere to go. And it should be our joint project to energise, to motivate, those idle savings, to help them overcome their great fear that keeps them idle, and channel them into productive investments – not investments into assets, but investments into real productive capacity. Now, how do we do this? Well, we have the European Investment Bank [EIB] that could do this. And we have the European Central Bank which is embarking on quantitative easing. Well, why can’t the EIB fund a major ‘New Deal’ for Europe, that channels investment to the private sectors of the countries and regions within countries that have a major output gap? [44 mins]

The whole of Varoufakis speech at the Brookings Institute and the subsequent Q+A session is embedded below:

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last frenzy of reasonableness…?

Just days after Syriza were swept to election victory on January 26th, economist and former US Assistant Secretary of the Treasury for Economic Policy under Reagan, Paul Craig Roberts, published an article entitled “Is Democracy Dead In The West?” which began:

We will find out the answer to the question posed in the title in the outcome of the contest between the new Greek government, formed by the political party Syriza, and the ECB and the private banks, with whose interests the EU and Washington align against Greece.

Roberts, once known as the “Father of Reaganomics” but more recently a repentant neo-liberalist and outspoken opponent of the financial elites, continues:

The new [Syriza] government wants to moderate the agreements made by previous Greek governments that sold out the Greek people. The new government wants to stop giving away at bargain prices Greek public assets to clients of its creditors, and the new Greek government wants to raise the Greek minimum wage so that the Greek people have enough bread and water on which to live.

However, for the private bank creditors, for Merkel’s Germany that stands behind the banks, for Washington which could care less about the Greeks, for the Greek elites who see themselves as “part of Europe,” Syriza is something to be rid of.

Adding that:

A purpose of the “Greek financial crisis” is to establish that EU members are not sovereign countries and that banks that lend to these non-sovereign entities are not responsible for any losses with regard to the loans. The population of the indebted countries are the responsible parties. And these populations must accept the reduction of their living standards in order to ensure that the banks do not lose any money.

This is the “New Democracy.” It is a resurrection of the old feudal order. A few super-rich aristocrats and everyone else serfs obliged to support the ruling order. 12

The question is, who is actually right here? Certainly we ought to acknowledge that elements in Paul Craig Roberts’ more conspiratorial outlook are irrefutable, recognising that Goldman Sachs did indeed deliberately help to hide previous government debt in order to extend credit to Greece. The Greeks were set up; this has been established – details of Goldman Sachs involvement can be found in this previous post.

Varoufakis is diplomatic, arguably too diplomatic. But then, is Paul Craig Roberts unduly pessimistic when he says that Syriza can now do “very little”, and, in either case, is the very moderate and rather modest approach of Varoufakis a good one, pragmatically speaking? Extending a hand of friendship being unlikely to impress “the powerful rich interest groups that rule the West [who] could not care less about the people over whom they rule” (to quote Roberts again, who knows them well, of course). Yet it may be effective in another way, such relentless persuasion and his “frenzy of reasonableness” at least winning the more public battle for hearts and minds. My own view is that Varoufakis (and Syriza) have adopted a sensible stance, which is in fact evidenced by the harsh criticism they have received from both extreme flanks. Appearing too flexible has made him a target for derision from the more radical (and Communist) left-wing, whereas standing his ground irritates his more powerful opponents working within the establishment (who lash out publicly whenever Varoufakis is out of earshot).

Meanwhile, ‘Grexident’, German Finance Minister Wolfgang Schäuble’s own portmanteau neologism (I gather), is now trending on twitter – not literally, of course, because it doesn’t have a celebrity angle. But the hashtag certainly exists and the tweets that include it are mostly German and Greek, alternating like a stack of incomprehensible post-it-notes. And sadly, the word ‘Grexident’ isn’t the only eurozone nonsense currently trending:

Academic-turned-finance minister Varoufakis was called “a time-waster, a gambler and an amateur”, a source privy to the closed-door talks told the news service Bloomberg.

This is according to a Guardian article published on Friday [April 24th] and entitled “Time is running out for Greece, says Eurogroup chief”. The article continues:

Jeroen Dijsselbloem, head of the eurogroup of finance ministers, told reporters in Latvia it was a “highly critical” meeting as Greece had still not agreed a comprehensive and detailed list of reforms.

Although there were positive signs, there remained “wide differences to bridge on substance”, he said.

“We are all aware that time is running out … too much time has been lost.” […]

Dijsselbloem warned on Friday that after the lack of recent progress it would be very hard to consider a new programme for Greece to cover its funding needs beyond June. He ruled out giving Greece an early slice [of] bailout cash. […]

ECB president Mario Draghi also betrayed his exasperation and warned that central bank could impose tougher conditions in return for keeping Greek banks afloat.

Weeks ago, the Riga meeting had been pencilled in as the moment when the eurozone could sign off an aid payment for Greece, but in the event ministers vented their frustration with Varoufakis for Greece’s failure to bridge the gap with creditors.

Just to remind you, Mario Draghi is not only the former vice chairman of Goldman Sachs – directly implicated in bringing the crisis to Greece – but serves as a trustee of the Brookings Institute. 13

So watching Varoufakis descend into the belly of the beast that is the Brookings Institute and to receive such a warm welcome and nonjudgmental reception, I must confess that I was instantly reminded of the film, Goodfellas, Martin Scorsese’s gangster classic, and of one scene in particular:

“If you’re part of a crew, nobody ever tells you that they’re going to kill you. It doesn’t happen that way. There weren’t any arguments or curses like in the movies. So your murderers come with smiles. They come as your friends, the people who have cared for you all of your life, and they always seem to come at a time when you’re at your weakest and most in need of their help.”

But Varoufakis is not easily daunted, and so, as the Guardian piece describes:

Varoufakis said the talks [in Latvia] were “intense”, but remained confident that the two sides will resolve their differences in time.

“We agreed that an agreement will be difficult but it will happen and it will happen quickly because that is the only option we have,” he told a press conference.

Varoufakis later declared: “We want an agreement and we are willing to make compromises to achieve this … The cost of not having a solution would be huge for all of us, Greece and the eurozone”. 14

In saying so, he is quite correct. Not only the Greeks, but the Germans too, whose major banks are set to carry the heaviest losses in the event of default, ought to be aware of the extreme dangers of such brinksmanship. A basic instinct for self-preservation is what Varoufakis is relying on, but for so long as the banks and other financial institutions remain confident of receiving further bailouts, it is the German taxpayers who ought to worry – as should the rest of us – because so long as they remain “too big too fail” (i.e., untouchable) then bankers like Mario Draghi and co really have nothing at stake. For once the Greeks are unable to shoulder the debt burden, as Varoufakis reminded us last summer, it will be passed on to the shoulders of the Germans and the French.

Indeed, the people of Europe stand to lose enormously if this so-called ‘Grexident’ (in reality ‘Grexpulsion’) leads to ‘Grexit’ and then to ‘Grextagion’ as it will be doubtless be called; as idiotically named as it will have been idiotically contracted and spread. Because, if no compromise can be reached in spite of Varoufakis’ tireless efforts, then sooner then we imagine we may all be standing in the Greek people’s shoes.

*

Update:

A weekend can be a very long time in politics…

Unbeknownst to me, on Sunday 26th [the day before I posted this article] Yanis Varoufakis had put out a tweet in which he quoted the words of Franklin D Roosevelt, who famously said “They are unanimous in their hate for me; and I welcome their hatred”, adding simply “A quotation close to my heart (& reality) these days”:

FDR, 1936: "They are unanimous in their hate for me; and I welcome their hatred." A quotation close to my heart (& reality) these days

This would be one of his final acts as chief negotiator at the Eurogroup meetings:

Greece moved to inject fresh momentum into problem-plagued talks with creditors on Monday, reshuffling its negotiating team to try and defuse tensions over its outspoken finance minister. […]

In a bid to ease tensions with lenders, the Syriza party-led coalition said the minister of international financial relations, Euclid Tsakalotos, would take over the coordination of the new team. The appointment will see the economics professor, who was raised in the UK, assuming a more active role in face-to-face negotiations with creditors.

So writes Helena Smith in the Guardian [April 27th], her reportreleased a mere two hours after I posted.

Varoufakis told us that before he took the job he had written a pre-prepared resignation letter to carry around with him at all times, just in case he ever found himself sounding too much like a politician. Hopefully this will not be needed, and news that he has been “removed” is perhaps a little exaggerated:

[However,] one well-placed Athens official insisted that Varoufakis’s role had been upgraded “in many ways”. The official added: “To make him resign would be to retreat and the government would never do that.”

Three months after his elevation to power, prime minister Alexis Tsipras has come under extraordinary pressure to remove Varoufakis. Yet last night Tsipras said that his finance minister “is an important asset for the government, and [with creditors] he speaks their language better then they do”. In a wide-ranging interview aired on Greek TV, Tsipras rejected suggestions that his government had any intention of sacrificing the politician. Now that negotiations with creditors were in the final straight, Greece had to reorganise its negotiating team, the PM said. […]

But insiders insisted that the politician still enjoyed Tsipras’ confidence, even if the young premier was now reaching out to the German chancellor Angela Merkel in an effort to reach a political solution.

With his high popularity ratings at home, Varoufakis is credited with internationalising the country’s debt problem and raising questions over austerity economics.

“They [creditors] couldn’t counter his economic arguments rationally so they went for him claiming he didn’t understand eurozone rules and regulations, that his reforms weren’t good enough,” said one official. “Tsipras knows this is not about Varoufakis, but his government, because it has dared to take on the system that is Europe’s neoliberal doctrine. He knows that if one goes the other goes too, which is why Varoufakis is here to stay.”

I very much encourage Tsipras to stick by Varoufakis, certainly in the capacity of his chief economic advisor, if not within government itself. We so very seldom see anyone of such intelligence, integrity and courage in public office. The world needs more politicians like Varoufakis, not less.

Please note that I corrected this update after mistakenly believing that Varoufakis had stepped down from his role as Greek Finance Minister. Apologies for posting the incorrect original version.

3 Here are some interesting graphs taken from an wikipedia article entitled “European sovereign-debt crisis”, which show the rise in the levels of Greek, Spanish and Portuguese debt since 1999 as compared to the average of the eurozone:

All three graphs (and others including those for Ireland and Cyprus) show a marked turning point around 2007–8, providing further evidence not only that “austerity” hasn’t worked (even within its own terms of debt reduction), but that the western world is actually faced with a systemic banking crisis that flared up at that time. The debt-to-GDP ratios have flattened towards the end, but even so the downturn is mostly in the projected regions.

And this is from an article written by Tyler Durden and posted on zerohedge from February 18, 2013:

“Beleaguered Prime Minister Mariano Rajoy just broke another record. As if a plague of corruption scandals was not enough, Spain’s debt-to-GDP has now reached levels not seen in over 100 years. As El Pais reports, Spanish debt levels rose at an alarming EUR 400 million per day in 2012 making for the largest annual increase in debt in the nation’s history – all the while proclaiming austerity.”

And here’s another helpful graph that goes along with the article, showing once more that rather than reducing the nation’s debt, “austerity measures” are more closely correlated to the growth of that debt:

5 Based on figures taken from an article entitled “Greece’s PSI is Dead on Arrival: An error in search of a rationale but also a failure that may prove a harbinger for the Modest Proposal” written by Yanis Varoufakis, published on January 11. 2012:

Back to the drawing board, our European leaders came up with a deeper haircut in October 2011. They called it PSI Mk2 and even had the foolish Greek PM fall on his sword, to be replaced by a hitherto loyal ECB functionary, so as to ensure that PSI Mk 2 would become Greece’s new light on the hill; a beacon of the last glimmer of hope for a desperate nation. PSI Mk 2 envisaged an impressive sounding 50% reduction in the GGBs’ face value which, in present value terms, would result in a haircut no less than 60% (since the interest rates charged on the new bonds, that would be swapped with the old ones, could not exceed the interest rates charged by the ECB and the EU for the original bailout funds). In other words, holders of GGBs would be hair-cut in two ways: a 50% reduction in face value and an interest rate less than 5% which would cut further into the present value of the old GGBs.

“The one thing if I were, I am not, but if I were the CEO of Deutsche Bank, I would be very wary of the dangers from “the Troika” in Athens that is casting a critical gaze into what is happening to Greek banks. Because if “the Troika” takes a keen interest, it will have to declare that the Greek banks are beyond salvation. And the only possible outcome of that would be nationalisation of these banks.”

“There is no doubt that there was a great deal of incompetence. Our leaders, and I have to say most of my profession – speaking as an economist – had become steadily lobotomised since the late 1970s. We didn’t have leaders who understood macroeconomics… You just let the markets perform their triumphant trick and everything will be fine. Politicians were convinced of that, their careers went swimmingly, their cosy relation with the financial sector was working out for them beautifully. When the whole thing, this bubble, collapsed, they were found wanting analytically – they didn’t understand what happened – they believed their own rhetoric and when they started realising the truth, at that point they had already misled parliaments and electorates to such an extent that they would much rather die than confess to the sins of omission and commission.” [25:45 min]

Regarding the Greek situation, the Greek debt, for instance. What we need to do is, we need, since the German government is going to find it politically very difficult to go to the parliament in Berlin and say: Well, it was all a mistake, we have to write off their debt. What you can do is you can create euphemisms – you can create what Keynes referred to as bisque bonds, GDP-related bonds. The Greek government could issue particular bonds that it exchanges for the debt that the ESF [European Social Fund] holds. And those bonds could specify that they can last 30 years let’s say. In 30 years they become extinct whether they have been repaid or not. And that the coupons, the repayments, on a year to year basis depend on the level of growth in Greece. So if growth is more than 3% then it specifies particular payment. That way Mr Schäuble will be able to look at his parliamentarians and say: We haven’t haircut it, but the extent to which the Greek debts will be repaid will be linked to our success in helping Greek growth. So you make them partners in Greek growth as opposed to bailiffs who come in and take your furniture away and throw you out on the street. [33:15 min]

Three things: The first thing we need to do is deal with the banking sector troubles throughout the eurozone. And the way I would do it – because we know we have declared this banking union which is really a term confirms there is no banking union – so what we should do about banks is this: Banks that are found out by the ECB in September (when the ECB assumes the role of the single supervisor of the banking system) to be wanting in terms of recapitalisation to have bad assets that have not been declared so far, they should accept money from the ESM – from the European stability mechanism – directly, not through the governments, directly. And the ESM should get shares, the shareholders should be wiped out and the ECB should appoint a new board of directors – hopefully not from within the country in which the bank is domiciled. This way you Europeanise these banks. In 6 months, 12 months, you resell them – you will resell them with a profit because those shares will be purchased by the ESM at very low prices. And then the ESM gets money back, the European taxpayers get their money back, TARP-like. And you do it step by step. You don’t Europeanise all 6,000 banks. The banks that are in trouble…

The second thing you do is to deal directly with the public debt, which is getting worse everywhere – except in Germany because of the low, low interest rates due to the fact that the crisis is proceeding. The European Central Bank should make a simple announcement tomorrow morning that will cost it nothing, zero. And the announcement is this: From now on, every time a government bond matures, the ECB will service, will pay, for the proportion of that bond that corresponds to the country’s Maastricht compliant legal debt. So in the case of Italy it will be half of it. So the European Central Bank will pay for this, not the Italian government. Now I said it won’t cost the European Central Bank anything, so how can that be if it pays half of it? The answer is the ECB issues its own bonds and sells them to the Chinese, to the Russians, to whoever wants to buy them at very, very low interest rates – because the ECB is such a sterling institution – and immediately opens a direct debit account for Italy. And says to Italy: Look, within ten years, this amount of money has to go in there in order to repay the Chinese. So in other words, what I’m suggesting is that the ECB should play a management role for public debt in Europe that costs nothing, that doesn’t require printing a single euro, and does not violate any treaty. Because ths is not a bailout…

And then we have the big problem of growth. Of investment. We have an amazing dearth of investment in Europe, both in the north and in the south. Even in Germany. So what we need is really a Roosevelt-like New Deal – a very large investment programme. I am not talking about a 100 million here and a 100 million there. We need something between 8 and 9% of eurozone GDP to be invested in productive activities… That would be what we need in order to avert deflation and in order to restart growth in Europe. Now we have the European investment Bank in Europe. The European Investment Bank is three times the size of the World Bank. It could very easily effect such a large scale investment-led recovery programme in Europe. The reason why it doesn’t do it, is because the convention is that 50% of every project is funded from a nation state. The nation state is bankrupt. Waive it. And what should we do instead? We should have either the ECB issuing more bonds in order to support the EIB bonds or something simpler than that. Everyone now, including Mr [Mario] Draghi and Mr [Jens] Weidmann [President of German Bundesbank], are speaking about the need for quantitative easing in Europe. Or at least they are considering it. Now we do not want American-style or British-style quantitative easing because this simply inflates bubbles… Mr Draghi’s worried about quantitative easing because he doesn’t know which assets to buy. German assets? Italian, you know, we are going to start arguing like children amongst ourselves, as to whose assets should be purchased. Bu the European Investment Bank issues European bonds, EIB-bonds. Why not have the EIB effect quantitative easing by purchasing EIB-bonds to such an extent that the EIB ca start a New Deal for Europe programme of 8–9% of eurozone GDP with the ECB buying only its bonds, which are European bonds? And also they are triple-A bonds. Now that a combination of those three measures would deal with the banking sector crisis, it would create a rational way of managing the Maastricht compliant and legal part of the debt… and you have a massive investment-led recovery programme.

Mr. Mario Draghi has been the President of Executive Board and President of European Central Bank since November 2011. Mr. Draghi served as Governor of Banca d’Italia SpA since December 29, 2005 until November 01, 2011. He served as Managing Director of The Goldman Sachs Group, Inc. until January 2006. He served as Director-general of Italy’s treasury. He served as an Adviser to the Bank of Italy, an Executive Director of the World Bank and as a member of the Group of Seven deputies. He served as the Chairman of Financial Stability Board. He has been a Director at Bank For International Settlements since June 2012. He serves as a Trustee of The Brookings Institution. He has been Member Of Governing Council of European Central bank since January 16, 2006. He served as a Member of Governing Board at Banca d’Italia SpA and served as its Member of General Councils. He served as Member of Board of Governors – Italy of Asian Development Bank until November 2011. He served as Director of Bank For International Settlements from September 2011 to November 01, 2011. Mr. Draghi has a Doctorate in Economics from the Massachusetts Institute of Technology.

On the latest leg of his whistle-stop European tour, Greek Finance Minister, Yanis Varoufakis, today met with his German counterpart, Wolfgang Schäuble, in Berlin to continue talks on Greece’s debt. This was an extraordinary occasion and the press conference that followed their historic meeting can be watched on the video embedded below.

Varoufakis begins his main statement at 23:30 mins. In it, he outlines the forgotten reasons why Greece has been in an economic crisis for the last five years and highlights the serious implications were his government to fail in bringing about the urgent and radical economic reforms that are necessary to save the nation. But his tone throughout is very much one of reconciliation and so, for instance, he explains at some length why Tsipras’ decision to visit the war memorial immediately following his victory should not be misconstrued in petty nationalist terms (as so many in the media were quick to do) but understood correctly as “an act of defiance against the resurgence of Nazism” in Greece:

Here is my own transcript of Yanis Varoufakis’ full statement:

Ladies and gentlemen,

This morning – earlier today – I had the opportunity, the pleasure and the joy to outline to Minister Schäuble our government’s priorities for a functioning Greece in a prospering democratic European economic and monetary union. As Doctor Schäuble said, we didn’t reach an agreement, it was never on the cards that we would. We didn’t even agree to disagree from where I’m standing – from where I’m standing we agreed to enter into deliberations as partners with a joint orientation towards a European solution for European problems. A solution that is going to put, first and foremost, the interests of Europe at the helm. We didn’t discuss Greece’s debt schedule for repayments. We didn’t discuss a haircut. We set the scene for deliberations that will lead an approach that will put an end to this never-ending – seemingly never-ending – crisis that began in Greece then unfortunately spread out to the rest of the Eurozone.

Greece’s economic woes have been occupying the headlines for far too long. They have been begetting indignity in my nation, and frustration in this country as well as across Europe. It is time to draw a line. To put an end to it. My fellow Greeks wish nothing more than to end the gross indignity, and I’m sure that the people of Germany too would like to get on with concerns other than how to negotiate the latest twists and turns of the Greek saga. Some in Europe are tempted to imagine that the solution lies in separation. Thankfully, today I did not just visit the Finance Minister of Europe’s powerhouse economy, above all else I visited a European statesman for whom European unity is a lifelong project, and whose work and efforts to unify Europe I have been following with great interest since the 1980s.

Today my message to Minister Schäuble was that in our government – in this government – he has a potential partner in the search for European solutions to a variety of problems afflicting not only Greece, but the Union more broadly. Starting at home where one ought to start, our government will stop at nothing to combat not only corruption, tax evasion, tax immunity, inefficiency and waste, but also a whole political economy underpinning the ethos and the conventions of crippling rent seeking. In this endeavour, I told the minister, we need our partners’ technical, moral, political and institutional support.

Over the last five years, since Greece’s flimsy business model broke down, too much time, and too many hopes, lives even, have tragically been wasted. In 2010, Greece and Europe missed the splendid opportunity to come to terms with the facts. Instead, we treated an insolvency issue as if it were a problem of illiquidity. Therefore, the largest loan in history was granted to the most insolvent of European nations on condition that it shrinks its income. And to sell this grand error to voters in Greece, to voters in this country, in every corner of Europe, a list of reforms was announced that was just a fig leaf for in the end reforming very little that mattered. This could not end well. It is the reason we are here. It is the reason why the Greek people swept over the dominant parties in Greece and elected us. It is why we have been on the road in the last few days deliberating with our partners for the purpose of forging a common and European plan for putting things first – for putting things right.

My message to my German counterpart and to the people of Germany is simple. From our government you can expect a frenzy of reasonableness. You can expect proposals that are aimed, not at promoting the interests of the average Greek, but of promoting the interests of the average European: the average German, Slovak, Finn, Spaniard, Italian and so on. You can expect from us an unwavering commitment to telling it as it is, without any tactical stratagems or subterfuge. You can expect from us sound macroeconomic analysis and a readiness to implement efficient microeconomic reforms that work. These are our commitments. We are a government that hasn’t even been sworn in yet. What we request at this stage is perhaps the most precious of commodities: time. A short space of time during which our government can present to our partners, to the International Monetary Fund, to European Central Bank, to the European Commission, comprehensive proposals as well as a roadmap for the very short term – we call this “a bridging programme” – for the medium term, and indeed for the long term.

Europe is I believe at a crossroads. Europe must strike a balance between continuity and a need for respecting European agreements, and the necessity of evolving the rules. We must respect established treaties, agreements and processes, without crushing the fragile flower of democracy with a sledgehammer that takes the form of statements such as “elections do not change anything”.

When I visited Paris the other day I said that we were returning to one of Greece’s spiritual homes. Today we returned to another one of our spiritual homes. For almost two centuries the land of Goethe, Beethoven, Hegel, Kant has been a source of inspiration to Greeks whether they are rightists, leftists, centrists or simply intellectually curious Greeks. But there is more than that to the bonds binding our nations. As finance minister in a government facing, from day one, emergency circumstances caused by a savage debt deflationary crisis, I feel that the German nation is the one nation in Europe that can understand us better than anyone else. No-one understands better than the people of this land how a severely depressed economy combined with a ritual national humiliation and unending hopelessness can hatch the serpent’s egg within its society. When I return home tonight I shall find myself in a parliament in which the third largest party is not a neo-Nazi party, it is a Nazi party.

When our Prime Minister laid the wreath at the iconic memorial site immediately after his swearing in, that was an act of defiance against the resurgence of Nazism. German must and can be proud of the fact that Nazism has been eradicated here. But it is one of history’s most cruel ironies that Nazism is rearing its ugly head in Greece, a country which put up such fine struggle against it. We need the people of German on our side. We need the people of Germany to help us in the struggle against misanthropy. We need our friends in this country to remain steadfast in Europe’s post-war project that is: never again to allow a 1930s-like depression to divide proud European nations. We shall do our duty in this regard, and I am convinced that so will our European partners. Thank you.

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Additional:

Back in 2011, Yanis Varoufakis presented a very interesting TEDx talk entitled “A Modest Proposal for Transforming Europe” in which he outlined his own vision for a new kind of decentralized system that will be needed to transform the European Union before it crashes altogether:

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On February 7th, the Keiser Report returned to the victory of Syriza, warning Greece to beware bureaucrats and bankers bearing bailouts. In the second half, Max Keiser spoke with Kerry-Anne Mendoza about her new best-selling book, Austerity: The demolition of the welfare state and the rise of the zombie economy:

Victory for Syriza means the election of the first anti-austerity party in the western world. Our heartfelt congratulations and best wishes should go to everyone in Greece. The cradle of civilisation and birthplace of democracy have pointed the way forward once again.

Following the financial crisis (which was actually a banking crisis, as I have pointed out many times before), it was Greece that was unfortunate enough to be singled out and placed at the head of the queue for dose after dose of neo-liberal economic shock therapy. The so-called “Troika” of the IMF, ECB and EU being quick to impose a strict austerity programme, backed up with further ‘Washington Consensus’-style ‘conditionalities’ — the enforced privatisation of public services and other types of ‘deregulation’.

More than half a decade later, and instead of prosperity, “austerity” (i.e., savage cuts – I always apply apostrophes) has created a vicious spiral of debt, with mass unemployment and reduced incomes leading inexorably to reduced demand, stifled economic growth and, no less importantly, lost tax revenues that would otherwise have been available for government investment. Along the way, money has been deliberately siphoned from the poorest in society to the wealthiest. But then “austerity” provides a wonderful excuse for this theft and always did.

The main message to be taken from Sunday’s dramatic election result – a landslide victory for one of the newest parties in Europe – was perfectly loud and clear, though certainly not the one that the news media will want you to focus on. It is that ‘austerity’ simply does NOT work! (except for a tiny elite who, some twenty fours prior to the Greek election, were flying home to their mansions from that annual obscenity known as the World Economic Forum in Davos in about seven hundred separate private jets.)

Click here to see a full breakdown of the election results region by region.

Of course, and especially in light of the vapid insincerity of Barack Obama’s 2008 “Hope and Change” campaign, it is understandably difficult for many people to grasp that any kind of meaningful political change can be delivered through the ballot box (or achieved in any other way). Duped over and over again in election after election, we have all been conditioned to believe in our own helplessness. And Obama, more than perhaps anyone else, has been responsible for undermining hope, causing us to feel that to dream of a better future is forlorn and that whatever sociopolitical change comes, invariably turns out for the worst. But we must remind ourselves that Obama was an out-and-out phoney. An insider, Wall Street crony, who was astutely repackaged as a messianic saviour for a naive and race-divided American public. Alexis Tspiras and Syriza are a different kettle of fish altogether. They offer a genuine grassroots opposition which, unlike Obama, came into office despite the efforts of a hostile media, and still remain free from corporate strings. They also bring to the table a set of carefully deliberated economic and other policy demands – something else that was conspicuously absent from Obama’s intentionally vague “Hope and Change” campaign.

Whether or not Alexis Tsipras and Syriza will now deliver on all their promises we must wait and see. Meanwhile, the people of Greece and elsewhere might help if only by continuing to loudly voice support for those same demands. This is a time for everyone of goodwill to put aside lesser ideological differences – just as Syriza have already done by forming a coalition with a party of the right – to join the Greeks in solidarity, supporting their struggle for self-determination and basic democratic control against the oppressive outside forces of “the Troika”.

What the Greek people achieved on Sunday also presents us with a solid foundation for our own fight against “austerity”. They have opened up a window of opportunity (perhaps a narrow one) for establishing a movement that demands real change across the whole continent. For this victory was not about Syriza as such, but about a principle. That lives of ordinary people matter far more than a plethora of inanimate market indices and corporate balance sheets. The greater hope being that a spark from Syriza’s extraordinary election victory will be enough to ignite a chain reaction through Spain (with Podemos), Portugal, Italy and on and on, to ultimately force a total cessation of the callous insanity of the imposed “austerity” regime. And our hopes ought not to end with mere ‘change’ per se, which may of course be good or bad, but for a lasting improvement in our societies, beginning at the economic level, and bringing about a more prosperous future for all nations.

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Here in Britain, the closest group we have to Syriza is Left Unity, who have already formed a loose alliance with both Syriza and Podemos:

Somewhat belatedly (in my opinion), Left Unity recently launched their own election campaign. They are now asking for support:

Austerity has wrecked Britain. We are far worse off now than we were in 2010 – and all we are promised is more hard times. Today the richest 1% in Britain own as much wealth as the poorest half of the population put together.

The 2015 general election will be an opportunity for millions of people across the country to have their say over the austerity programme of the Con-Dem government. The propaganda machine has already sprung into action, with George Osborne claiming to be tackling the national debt and to have the economy back on track. In reality, real wages are falling, prices are soaring – and the deficit has actually grown under his austerity regime.

And yet the opposition from Labour has been appalling. They have given ground on almost every key issue. Labour has promised to keep to the Tory spending plans if they are elected in May. They won’t roll back any of the changes to education. They claim they will repeal the Health and Social Care Bill, but they won’t scrap PFI, which is bankrupting hospital trusts.

We will be standing candidates in different constituencies across the country. Our plan is not to stand hundreds of candidates, but to get organised in selected key seats to get Left Unity’s message out to potential voters.

We need your support now to help organise election campaigns on the ground. Left Unity’s national council has issued an appeal for £20,000 to fund this work.

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Additional:

Yanis Varoufakis, who is professor of economic theory at the University of Athens, has been appointed as the new Greek Finance Minister. Here is an interview he gave that was broadcast on Russia Today’s “Boom Bust” back on January 12th (a fortnight prior to the election):

And this is Varoufakis speaking two years ago in an address that was presented to the founding assembly of the United Front Against Austerity (UFAA) on October 27, 2012 in New York City:

On February 2nd, the Keiser Report was devoted to analysis of the Greece situation. Reminding us that Greece is insolvent in much the way the banks were and remain insolvent, Max Keiser and Stacy Herbert also highlighted the vital role that Goldman Sachs had played in an earlier deception to hide Greek debt. A scheme which enabled the Greek government of the time to meet the criteria necessary to join the Eurozone:

Toffed up to the nines and luxuriating in five-star privilege, David Cameron recently told a gathering of fellow ministers and lords during the annual Lord Mayor’s Banquet at the Guildhall in London that the devastating “austerity” will be “permanent”:

The age of austerity is not just a passing phase and Britain should get used to having a ‘permanently’ smaller state, David Cameron said last night.

The Prime Minister used one of his most significant speeches of the year to say that low public spending and a ‘leaner, more efficient state’ would have to be maintained permanently in order for the UK to succeed.

He said the country would have to rediscover its traditional ‘buccaneering’ spirit for private enterprise in order to generate wealth instead of relying on the state.

His remarks are a significant shift for a leader who said in 2010 that he ‘didn’t come into politics to make cuts’, insisting: ‘We’re tackling the deficit because we have to – not out of some ideological zeal.’1

Tory cuts, ideological? Come, come…

If you can stomach any more of it, the full Daily Mail article is here.

Curiously, chief political correspondent at the Guardian, Nicholas Watt, lets Cameron and his Coalition government off the hook too, accepting his pleading that the cuts are “not out of some ideological zeal”:

In a change of tack from saying in 2010 that he was imposing cuts out of necessity, rather than from “some ideological zeal”, the prime minister told the Lord Mayor’s banquet that the government has shown in the last three years that better services can be delivered with lower spending.

Watt adding that:

The remarks by the PM contrasted with his claim after the 2010 election. In his New Year’s message for 2011, issued on 31 December 2010, he said: “I didn’t come into politics to make cuts. Neither did Nick Clegg. But in the end politics is about national interest, not personal political agendas.” […]

Yet this declared “change of tack” is absolute nonsense and easily refutable nonsense at that. Here, for instance, is what Cameron promised back in April 2009 at the party’s spring conference when he was a mere leader of the opposition:

A Conservative government would usher in a new “age of austerity”

So begins a rather different Guardian article, this time from politics editor, Deborah Summers, reporting on what she (and others) then described as Cameron’s ‘age of austerity’ speech. Her article continuing:

The Tory leader insisted greater transparency would help to get Britain’s finances back on track as he used his keynote speech to the Conservative party forum in Cheltenham to pave the way for sweeping cuts in public spending.

“Over the next few years, we will have to take some incredibly tough decisions on taxation, spending and borrowing – things that really affect people’s lives,” Cameron warned.3

So for the record then, Cameron has never changed tack at all. Neither for that matter have their Coalition ‘partners’, the spineless Lib-Dems, or even the supposedly left of centre Labour government. None of our main parties ever seriously discussing real alternative economic strategies, with policies differing purely in terms of how savage the cuts would “need to be”. The Tories, once in office and free to wield the axe thanks to the quiet complicity of their Lib-Dem lackeys, cutting deeper and faster because, in truth, they love nothing better than hounding the lower classes and impoverishing the poor.

Yet after more than three years of “taking our medicine”, a collective punishment very eagerly dished out by the Coalition government, there has basically been no recovery at all in any meaningful sense. Yes, GDP growth has been positive for three quarters, but even this is only at levels comparable to the end of 2009 and beginning 2010 – in other words, growth equivalent to that achieved during the last few months of the admittedly wretched and incompetent Labour government.4 So no improvement, whatsoever, and this is after three years of stagnation. On top of which, all these figures are “real” and thus “adjusted for inflation”. But then, of course, the inflation rate itself is already rather carefully finessed. Henry Blodget of businessinsider provides a helpful explanation of the effect of this adjustment, although here writing about US GDP growth back in May 2011:

The way the government calculates real GDP is to start with nominal GDP – the actual change in the output of the economy as measured by adding up all the actual sales prices (“nominal”) – and then “deflating” this number by subtracting an estimated inflation rate. Thus, the government backs into the real GDP growth number, starting with nominal prices and then adjusting for inflation.

Well, the “GDP deflater” the government is using right now – the estimated rate of inflation – is only 1.9%. As anyone who has been to a supermarket or gas station recently can attest, this assumption is preposterously low. But the effect on “GDP growth” of using a very low inflation estimate is helpful, in that it makes real GDP growth look bigger.5

GDP is regularly and rather casually accepted as an indicator of “standard of living”, although actually it measures something entirely different and far more abstract: the monetary value of all goods and services produced within national borders. “Standard of living” is therefore better assessed on the basis of a variety of alternative indicators including the quality of healthcare, standards in education, income growth inequality and so forth. That a string of successive governments have failed us in all these regards is widely acknowledged.

I know many who work in the NHS and can’t recall anyone ever telling me that services were getting better or their jobs any less stressful. More personally, I have worked in education for more than fifteen years and standards have unquestionably declined, whilst grade inflation is absolutely real. But then, we can all see how our public services, and the NHS especially, have become infested with managers; whilst our teachers, healthcare professionals (doctors excepted) and many other public sector workers have been put under increasing pressure, and further demoralised thanks to deteriorating pay and contractual conditions alongside flexploitation. Meantime our entire society is being steadily ripped apart by the ever-widening gulf in wealth and incomes. Much of this, of course, is Thatcher’s legacy.

Now I accept that there is indeed a great deal of waste in public spending, and pruning out levels of superfluous management as well as trimming salaries at the top could be beneficial as well as cost effective. But these are not cuts of the type being made on the ground. If the government were seriously intent on cutting back only on real waste, then it would apply its measures with something like surgical precision, but instead it brings the axe. Waste being just a smokescreen. And as with any axe, it hacks away at the bottom of the trunk. Making the most vicious cuts to welfare, which means deliberately snatching a little public money from those who can least afford to lose any, whilst simultaneously targeting the soft underbelly of our few remaining public services, which is also as deliberate as it is ideologically driven. Lastly, when it’s not cutting services, it’s selling them off instead – lowest prices, because everything must go…

Our government is now so openly committed to establishing its permanent “age of austerity” that for millions of people no hope survives that their standard of living will ever improve again – with the proposed £20bn cuts to the budget of our already broken and terribly overstretched NHS being nothing short of a final swing of the wrecking ball through Britain’s most treasured national institution.6 Indeed, a friend who is a dedicated political activist in London recently sent me a distressing email that put into better perspective (since it was founded on her own personal experience) how this talked-up “recovery” is absolutely nothing of the sort. She wrote:

Life is already unbearable/intolerable for many people in the UK on sick benefits having their benefits cut off or cut in half to £49 a week to live on, left with no money to pay bills or the water rates part of their rent, means eviction and out on the streets, living with no heat, no light, no gas, no electricity; or mental breakdown and in a mental hospital; or taking their own lives as they have nowhere to turn and an uncaring society that goes on about benefit scroungers. These people are too sick to work. This is pure fascism and no one is making a fuss in the UK – why? Where is the anger, where are the activists? Why aren’t they doing something? People who are too sick to work are being killed by this government.

Yes, as Cameron entertains an equally pampered audience from behind his gilded lectern, talking without a hint of irony about all the “hard choices” and “tough decisions” he has to make in this new age of perpetual “austerity” — does one use the fish knife for spreading one’s caviar? — people less than a mile away are already struggling to find a few coins for the electricity meter or food for the next meal. All of which elegantly sums up the age we are already living in: an age not of shared “austerity”, where “we’re all in this together” (even if we know it was the bankers who caused the crisis), but of “let them eat cake” disparity. Times, for instance, when super rich Premier League footballers (super rich by ordinary standards that is) wear shirts emblazoned with the name of payday loan sharks Wonga and no one seems to notice, no one feels ashamed, and so one begins to wonder, as my friend wrote: “Where is the anger, where are the activists? Why aren’t they doing something?”

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Yesterday, I received a new article from journalist and political activist Esther Vivas, which is appended below. In it she details the growing despair of the people of Spain as they suffer even more severe “austerity” bringing with it the inevitable mass unemployment, frozen salaries and escalating costs of living. Broadly, what she says about Spain sadly applies to nearly every corner of the western world and beyond.

Spain in 2014: Not a Prosperous New Year
Esther Vivas

We have entered 2014 a little poorer. For those of us with a job, our salaries have been frozen, or even cut; only a few can expect a rise in the New Year. Furthermore, the price of electricity, public transport and water are increasing.

2013 ended with the controversy over a threatened increase in electricity bills by 11%, leaving Spaniards paying well above the European average and Spain ranking the third most expensive electricity in Europe. So, Mariano Rajoy’s Popular Party (PP) government intervened and stopped this rise by decree. As you can see, if the PP wants to, it can intervene. But overall, there is little willingness to confront the interests of multinationals. For now, the government has limited the rise to 2.3%, and we are expected to be thankful.

The rising price of public transport is another traditional New Year scam. Train tickets, are up nearly 2%, and in Barcelona, not to be outdone, the fare raises on the subway are an abusive 5% with the most popular travelcard, the T-10. However, if you usually take the high speed train (AVE) , which is only used by a minority of citizens, do not worry, because the price has been frozen . Lucky too, are the drivers who use the highways from Castelldefels to Sitges and Montgat to Mataro, where the tolls have been reduced by 30% and 10% respectively, provided they use teletac card, the automatic payment system. Lower the cost of private transport and increase the cost of public transport – that’s the approach of Catalonia’s [right-wing nationalist] CiU government.

And in Barcelona, we face further rises, for water too, even if money appears to be in plentiful supply, especially for the city council, as we saw with the celebrations on New Year’s Eve at the Montjuïc fountain. The tourists are happy at least. But for the rest of us, water bills will be going up by 8.5 % on average in the metropolitan area of Barcelona, thanks to the votes of CiU and [Catalan Socialists] PSC, and the abstention of the [left nationalists] ERC. In the end, those who criticise the cuts are the first to sharpen the scissors. We will not forget.

Meanwhile, the minimum wage remains frozen, as was the case last year, leaving it at a meagre 645 euros per month, while public sector workers remain on the wages they received in 2010. Pensions of those ten million retirees who worked all their lives, will see their incomes hit by a change in indexation that means rises are tied to below inflation (CPI ); this year they will rise by just 0.25% , the minimum set by the Government. An increase that will barely buy a cup of coffee.

We enter this 2014, a little poorer. Our purchasing power slowly falls. Every year that passes we have less. They want to make poverty normal. Do you remember those stories, not so long ago, of those struggling on 1000 euros a month? The new precariat. Today an employer offering a job paying a thousand euros monthly would be swamped by curriculums. And yet some, like the Prime Minister, dare to say that 2014 brings “the beginning of the recovery.” What a bunch of thieves and liars.

*Article published in the Spanish digital newspaper Público.es, 02/01/2014. Translated by Revolting-Europe.com.

If 2014 is a year of hard truths for our country, then it starts with this one: Britain should never return to the levels of spending of the last government.

We’d either have to return borrowing to the dangerous levels that threatened our stability, or we’d have to raise taxes so much we’d put our country out of business. Government is going to have to be permanently smaller – and so too is the welfare system. […]

We’ve got to make more cuts. £17 billion this coming year. £20 billion next year. And over £25 billion further across the two years after. That’s more than £60 billion in total.

Click here to read a full transcript of George Osborne’s speech at gov.uk

From a report in the Guardian published the same day (co-authored by Nicholas Watt and Rowena Mason), we also learn that:

In an interview on Radio 4’s Today programme, Osborne said he would seek to achieve some of the £12bn savings by targeting housing benefit for under-25s and by means-testing people on incomes of £60,000 to £70,000 who live in social housing. But one Whitehall source said that targeting those two areas would produce “laughable” savings. Department of Communities and Local Government figures show that the 11,000 to 21,000 council tenants, who earn more than £60,000 a year, each cost the taxpayer £3,600 a year. Targeting this group would produce savings of £40m-£76m a year.

No doubt desperately intent to put some clear blue water between his own party and the truer blue Tories in the run up to the 2015 general election, the same article reports on Nick Clegg’s entirely belated fightback against what are in any case his own government’s “austerity measures”:

Clegg chose to describe Osborne’s plans to target cuts on the working-age poor – while ruling out tax increases – as “lopsided and unbalanced”. In a sign of how coalition relations will remain fractious until the election in May 2015, the deputy prime minister said: “You’ve got a Conservative party now who are driven, it seems to me, by two very clear ideological impulses. One is to remorselessly pare back the state – for ideological reasons just cut back the state.

“Secondly – and I think they are making a monumental mistake in doing so – they say the only people in society, the only section in society, which will bear the burden of further fiscal consolidation are the working-age poor.”

Signalling how he will waste no time in publicly criticising Tory plans over the next 16 months, Clegg later added: “I literally don’t know of a serious economist who believes that you only do it from that lopsided, unbalanced approach. Almost all serious economists say you have some kind of mix.”

Meanwhile, professional clown and London Mayor, Boris Johnson, managed to upstage both Osborne and Clegg on LBC radio by comparing Nick Clegg to a condom, describing him as “David Cameron’s lapdog-cum-prophylactic protection device”.

The London Mayor likened the Deputy Prime Minister to a “prophylactic protection device” as relations between the Tories and Lib Dems sank to a new low. The tirade came during a radio phone-in after Mr Clegg claimed George Osborne’s “extreme” plan to cut £12billion from welfare was a “monumental mistake”.

Furious Tory MPs called on the Lib Dem chief to apologise. Leading the backlash on LBC radio slot Ask Boris, jabbering Johnson said: “Clegg is there to perform a very important ceremonial function as David Cameron’s lapdog-cum-prophylactic protection device for all the difficult things that David Cameron has to do.

On November 27th, Alexis Tsipras, leader of Syriza in Greece, wrote an op-ed for the Guardian entitled “Austerity is wreaking havoc, but the left can unite to build a better Europe”. Here are a few pertinent extracts:

Those European leaders who claim that the current medicine is a “success” are hypocrites. For millions of people, the European dream has turned into a nightmare. Eurobarometer surveys show the growing crisis of confidence in the EU and the catastrophic rise in the popularity of far-right parties. What should give us hope is the emergence of new solidarity groups and community-based movements. They can and will lead to greater democratic participation and control. […]

Europe needs an anti-austerity and anti-recession front, a solidarity movement for its working people, north and south. This could deliver a pact for democracy, development and social justice. We must rebuild solidarity among the young, the workers, the pensioners and the unemployed to break down the new dividing line between Europe’s rich and poor, the “mur d’argent” to use a historical phrase that has become topical.

4A comparison can be easily made from studying a graph published by the BBC in late October. Figures from the ONS for UK GDP growth are as follows: 2009 Q4, 0.4%; 2010 Q1, 0.5%; 2010 Q2, 1.0% compared against 2013 Q1, 0.4%; 2013 Q2, 0.7%; 2013 Q3, 0.8%. Indeed, the accompanying article begins: “The figures mean that the economy grew at its fastest pace for three years.” After three years of Coalition government, in fact! http://www.bbc.co.uk/news/10613201

6 In October 2011, Denis Campbell and James Meikle investigated and reported in an article published by the Guardian entitled “£20bn NHS cuts are hitting patients, Guardian investigation reveals”.

They write: “This Guardian investigation details the latest evidence of increased cuts – the cuts that, according to the government, should not be happening – being implemented across a wide range of the NHS’s many care services. With £20bn due to be saved by 2015, and the NHS receiving only a 0.1% budget increase each year until then, experts predict that tough decisions – about the availability of services and treatments, staffing levels and which clinics and hospitals provide care – will become increasingly common.”

Should the Greeks submit to further the “austerity measures” that have already destroyed their economy and social infrastructure as Angela Merkel and others are demanding, or should they drop out of the Euro and begin tackle their debt crisis by returning to a hugely devalued Drachma? These are the only available choices, as we are all, Greeks included, constantly reminded.

Christine Lagarde, the Managing Director of the IMF, is one of those calling for continued “austerity”, and this is, of course, perfectly in-keeping with her position. Ruining countries through debt and “austerity” being the legacy of so much IMF and World Bank intervention. Lagarde is also keen to protect the Euro, and, as she made very plain in a recent interview to the Guardian [Fri 25th May], couldn’t care less what this means to the Greeks or the Spanish or anyone else in Europe:

So when she studies the Greek balance sheet and demands measures she knows may mean women won’t have access to a midwife when they give birth, and patients won’t get life-saving drugs, and the elderly will die alone for lack of care – does she block all of that out and just look at the sums?

“No, I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens.”1

We are given to believe that the IMF operates in order to help ailing economies and so judging her remarks on that basis, this is akin to the doctor telling a patient that they’re not interested in treating a broken leg whilst some of their other patents have cancer. Worse than that – because Lagarde and the IMF (as one arm of ‘The Troika’) actually caused the misery that the Greek people are now suffering by insisting upon such a ruinous austerity programme. Returning to the analogy then, and we see that in this instance the patient broke their leg having been run over by the doctor’s own car.

Lagarde seems unaware of her own organisation’s part in the Greek’s downfall, but then it should be noted that she is not an economist. She also has “the little kids” in Niger on her mind “all the time” apparently! Evidently “the little kids” in Athens don’t count. Now it’s hard to imagine Lagarde thought anyone would swallow such cant, which perhaps explains what she immediately went on to say in the same interview:

“Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.”

She wouldn’t say this if she was talking about Niger, of course, whether it was true or false. Anyone dismissing the plight of a African nation on the basis that their society is rife with corruption (which unfortunately is the situation facing most of the people on this planet) would be roundly condemned as a racist. In contrast, it is fine to speak ill of the Mediterraneans.

But this repeated accusation is also such errant nonsense that it’s hard even to begin to correct it. Not that there isn’t tax avoidance in Greece – of course there is – there is tax avoidance in all countries. And in all countries this avoidance is something that the wealthy do far better than the poorer classes. In the real world, accountants are mostly employed for the purpose. Tax avoidance is hardly even frowned upon. Indeed the world’s giant corporations are so good at it that they only pay small fractions of the contributions due of them.

Tax avoidance is absolutely rampant in our globalised off-shore world, and the vast scale of tax avoidance by corporations and the super-rich is a genuinely serious problem that should be urgently redressed. Not that it’s a problem that can be easily treated, just so long as most of the world’s leading politicians use the same legal loopholes and tax haven immunity themselves. But Lagarde doesn’t mean tax avoidance in any case, because if she did, she would be directly blaming previous Greek governments for their major part in such everyday corruption, rather than obliquely pointing the finger towards the ordinary Greek in the street. Her objection is not to tax avoidance but only to tax evasion. All those transparently illegal but comparatively minor tax infringements that are routinely committed by the business small-fry in every society – and just how many cash-in-hand payments slip the British government treasury’s coffers to fall instead into the pockets of our own independent traders?

Lagarde insinuates that the Greeks’ unpayable debts are entirely down to a lack of tax receipts. If this were true then it must follow that the fate of the Euro, and along with it the whole European project, is all now hanging in the balance because of the failures of the Greek tax collection system. But this is patent nonsense too – endlessly recycled nonsense at that – which, and if it only held a grain of truth, ought to make every one of us call into question our entire economic system simply on the grounds of its unsustainable frailty.

However, this financial crisis did not start with Greek taxpayers and will not be solved simply by collecting more Greek tax revenues now, as Lagarde’s comments also imply. This whole financial crisis is a banking crisis. One that was caused by systemic failures and criminal trading. It continues because those failures have never been rectified and because no prosecutions have yet been brought. Austerity cannot cure this disease. It will bring nothing but pain. So as our own lives get tougher – along with the lives of those in Germany, France and elsewhere – we should not be blaming the Greeks for their “contagion”, but people like Christine Lagarde, Angela Merkel and the other austerity-mongers for helping to turn a crisis into a catastrophe by such wrong-headed economic thinking.

So what of the second option – the one that already has the stupid text-style name of Grexit? Should Greece abandon the Euro altogether? Well, firstly, the Greeks cannot be forced to drop out of the Eurozone – or at least there is no recognised mechanism for expelling any member nation. Secondly, it should be noted that the Greek people don’t want to leave the Eurozone. Like most of the peoples of Europe, these days they are broadly enthusiastic about the European project. Added to this, they also clearly recognise the serious risks of trying to suddenly go it alone in such perilous times. Once isolated, the Drachma would be mercilessly attacked by the same predatory banks and hedge funds that are currently threatening to bring down the Euro. The Drachma wouldn’t stand the ghost of a chance.

Which brings us to an impasse. Accept “austerity” or get out! Jump off a cliff or suffer slow death by a thousand cuts. Is there really no genuine alternative for the Greeks?

Well, the answer to that question actually depends upon what you value. If you think that all debts are sacrosanct, then it necessarily follows that the Greeks must go on paying the banks to their bitter end. That the debt is unpayable doesn’t matter. That the debt is the consequence of so much ineptitude and malfeasance within the banking system doesn’t matter either. The Greeks must cough up because otherwise the chaos will worsen (or so we are again constantly given to believe). But if you value human life above money, and recognise that debts that cannot be repaid will never be repaid, then you can begin to think more constructively. In fact, the alternative becomes immediately and blindingly apparent. Since a debt cancellation will inevitably come sooner or later, the only real question is how much longer must the Greeks be punished in the meantime.

A way-out of all this mess is entirely possible. It doesn’t involve “austerity” and does not necessarily require a Greek exit from the Eurozone. What is needed is simply an end to the bottomless banker bailouts and then new money being made available for reconstruction projects and other productive enterprise within Greece, Spain and elsewhere. Such a ‘New Deal’ injection is unlikely to be offered by the IMF, and neither will it be supported by the likes of Angela Merkel. But it can be fought for by the Greek people themselves, and in this battle to stop the wanton destruction of their nation, as fellow Europeans we should stand with them, recognising that the same aggressive financial interests that have already eviscerated Greece, will be pillaging our own lands soon enough.

*

One potential hope for Greece is that in the coming second election, Syriza (a coalition of leftist parties not always in agreement with each other) may just pip the two more traditional main left (PASOK) and right (New Democracy) parties and win the election. Syriza have been attacked from both political flanks and by almost all of the mainstream media, and yet remain strong in Greek opinion polls. The reason presumably being their commitment to staying in the Eurozone whilst seeking an end the savage “austerity” programme through a total renegotiation of the loan agreed under Pasok, New Democracy and Loas (the Greek version of the BNP) prior to the recent elections and under guidance from a technocrat, Lucas Papademos.

Their leader Alexis Tsipras, who has certainly been bold in his criticisms of the German government for its self-righteous and unhelpful stance, is also trying to drum up vital support from other progressive leftist European parties. And Syriza together with the German party Die Linke have now to put together a 6-point programme offering “alternatives to austerity and bank rescue”. A set of proposals that other movements like los indignados and Occupy might also consider endorsing.

*

Additional:

In an article published in the Guardian on May 29th, entitled “Greece can do without the ‘sympathy’ the IMF has shown Niger”, Nick Dearden explains how in the 1980s, the IMF and World Bank’s economic reforms and “austerity programme” ruined Nigeran agriculture and helped unleash a famine:

These policies fed into the 2005 famine, a crisis caused not primarily by natural catastrophe – food was available but unaffordable – but by an appalling set of policy decisions. Even during a crisis there was no let-up in economic dogma. The IMF told the Niger government not to distribute free food to those most in need. Today’s so-called “tough love” to Greece is nothing new.

And yet these genocidal measures, which were part of “the IMF’s now infamous Structural Adjustment Programme”, ultimately failed even to reduce Niger’s debt levels:

The desperate impact of IMF policies on Niger has not even achieved the purported chief objective of the IMF – to control debt. In a Jubilee report released last week, we found that 10 years after debt cancellation, Niger’s debt payments as a proportion of government revenue are projected to be the same level as they were before cancellation. IMF attempts to “restructure” Niger have failed even in these terms.

Nick Dearden concludes:

To pretend that the IMF operated in a somehow kinder way towards Niger than it is doing in Greece stands up to no scrutiny whatever. The IMF’s policies cannot assist countries in crisis. Greece can learn from this – and has little to gain from Lagarde’s “sympathy”.

1 From an article entitled “Christine Lagarde: can the head of the IMF save the euro?” and captioned with the banner “Her charm is legendary, but Christine Lagarde, head of the IMF, is far from a pushover. She talks about sexism, swimming and saving the European economy”, written by Decca Aitkenhead, published in the Guardian on May 25, 2012. http://www.guardian.co.uk/world/2012/may/25/christine-lagarde-imf-euro